Polling – Climate Change Policy

Key Results

The Australia Institute surveyed 1,417 Australians between 5th and 7th of December 2017 about Australian greenhouse gas emissions and climate change policy.

Emissions have increased now for three years in a row, since the repeal of the carbon price. Energy emissions are now at record highs. Under the Paris Agreement, Australia has pledged an emissions target of 26-28% reduction on 2005 level by 2030, but there are no credible policies to get there. The Paris Agreement also includes a commitment to review and consider increasing ambition. Yet while Australia’s government considers subsidising new coal mines and power plants, and a ‘National Energy Guarantee’ policy touted as a support for coal, other countries – like the UK, Canada, France, Italy and New Zealand - are pledging to phase out coal power by 2030.

 More than two thirds (70%) of respondents said Australia’s emissions are staying about the same (36%) or going up (34%). o Only 9% said emissions are going down.  44% said Australia is not on track to meet its 2030 emissions target, while only 25% said it is on track. o 31% said they don’t know.  58% said Australia should increase its ambition on cutting emissions. o 25% said Australia should not increase its ambition. o Increased ambition was supported by most voters for ALP (64%), Greens (85%), Other (57%) and undecided voters (51%). o Around half of LNP voters supported increase ambition (47%), higher than opposed it (37%). One Nation voters had the lowest support (36%).  60% supported Australia joining the Powering Past Coal Alliance to phase out coal power by 2030. o Only 22% opposed joining the Alliance. o There was majority support from voters for most parties, including LNP (50%), ALP (67%), and Other (56%). The exception was One Nation voters (36%)

Polling – Dec 2017 – Climate policy Method

The Australia Institute conducted a national survey of 1417 people between 5th and 7th of December 2017 online through Research Now with nationally representative samples by gender, age and state and territory.

Results are shown only for larger states. Income crosstabs show household income.

Voting crosstabs show voting intentions for the lower house. Those who were undecided were asked which way they were leaning; these leanings are included in voting intention crosstabs, but results are also shown separately for undecideds. “LNP” includes separate responses for Liberal and National. “Other” includes Nick Xenophon Team and Independent/Other.

Polling – Dec 2017 – Climate policy Detailed results

To the best of your knowledge, are Australia's greenhouse gas emissions current ly going up or down?

Total Male Female NSW Vic Qld Going up 34% 33% 35% 33% 33% 32% St aying about the same 36% 38% 33% 38% 34% 38% Going down 9% 11% 8% 8% 10% 10% Don't know/ note su re 21% 18% 24% 21% 23% 20%

LNP ALP GRN PHON Other Undec Going up 25% 38% 55% 19% 32% 31% St aying about the same 43% 32% 28% 44% 31% 23% Going down 15% 6% 4% 15% 7% 6% Don't know/ note su re 18% 23% 13% 21% 30% 40%

Australia current ly has a target of cutting emissions by 26-28% on 2005 levels by 2030.

Thinking about current policy settings, do you think Australia is current ly on t rack to meet its emissions targets?

Total Male Female NSW Vic Qld Yes 25% 29% 21% 26% 25% 26% No 44% 44% 45% 46% 43% 42% Don't know 31% 28% 34% 29% 32% 32%

LNP ALP GRN PHON Other Undec Yes 35% 22% 21% 25% 15% 11% No 33% 48% 60% 34% 52% 38% Don't know 32% 30% 19% 41% 32% 51%

Polling - Dec 2017 - Climate policy In the Paris Agreement on climate change, countries agreed t o review t heir targets and consider increasing ambition.

Do you think Australia should increase its ambition on cutting emissions?

Total Male Female NSW Vic Qld Yes 58% 53% 63% 58% 59% 55% No 25% 32% 18% 26% 21% 29% Don't know 17% 15% 19% 16% 20% 16%

LNP ALP GRN PHON Other Undec Yes 47% 64% 85% 36% 57% 51% No 37% 17% 6% 44% 24% 13% Don't know 16% 19% 10% 20% 19% 36%

Countries like Canada, France, the UK, It aly and New Zealand have joined an international alliance pledging t o phase out coal power in t heir count ries by 2030.

Should Australia join t his alliance?

Total Male Female NSW Vic Qld Yes 60% 57% 63% 58% 63% 55% No 22% 28% 15% 23% 18% 27% Don't know/ now sure 18% 15% 22% 19% 19% 18%

LNP ALP GRN PHON Other Undec Yes 50% 67% 87% 36% 56% 50% No 30% 13% 6% 43% 22% 15% Don't know/ now sure 19% 20% 7% 21% 22% 35%

Polling - Dec 2017 - Climate policy

The impact of Galilee Basin development on employment in existing coal regions

Development of the Galilee Basin would displace production in other coal regions. Galilee mines would be more automated and less job-intensive than existing mines. Based on coal industry analysis, central estimates of employment reduction are 9,100 in the Hunter Valley, 2,000 in the Bowen Basin & 1,400 in the Surat Basin compared to a no-Galilee scenario. Galilee mines are likely to employ between 7,840 and 9,800 people, resulting in overall negative impact on coal jobs.

Discussion paper

Cameron Murray Bill Browne Rod Campbell July 2018

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Summary

With global coal demand stable or declining, product ion from new mines will displace product ion in exist ing mines. Large scale coal development in t he Ga lilee Basin in Queensland will significantly increase the supply of traded thermal coal and decrease coa l prices. Lower prices will reduce invest ment in other Australian coa l regions, and by extension employment in the mines of t hose regions.

New Ga lilee Basin mines will be large and highly automat ed, meaning t hey will employ fewer people per t onne of coal production. Adani have stat ed t hat in t heir project eventually "everything will be aut onomous from mine t o port." Automated Ga lilee Basi n mines will come at the expense of relatively job-intensive mines in other regions.

Indust ry analyst s Wood Mackenzie modelled the effect s of Galilee Basin product ion on other coa l mining regions - t he Hunt er Valley, Bowen Basi n and Su rat Basin. They estimate that Ga lilee Basi n production of 150 m illion tonnes per year would reduce coa l volumes in ot her areas by 116 million tonnes in 2035 relative to a baseline scenario with no Galilee Basin development.

Th is paper estimates t he effect on jobs of this relative reduct ion in production from established coa l regions. Th ree methods are used t o estimate t his impact:

• Applying average labour product ivity of exist ing coal mines t o relative reduction in coa l volume. • Applying marginal labour product ivity of existing coa l mines to relat ive reduction in coa l volume. • Analysing est imat ed workforce of mines identified as being delayed or ca ncelled by Galilee Basin development.

Results from t hese three est imates are presented in the Summary Table below:

Summary Table: Relative reduction in employment per region in 2035

Average Marginal Workforce in impacted productivity productivity mines Hunter Valley 9,737 9,102 7,650 Bow en Basin 2,212 2,015 2,456- 3,326 Surat Basin 1,692 1,363 2,444 Total 13,641 12,480 12,550 - 13,420

The impact of Galilee Basin development 1

Based on Adani’s estimates of labour productivity in its mines, the Galilee Basin would employ between 7,840 and 9,800 people to produce 150 million tonnes per year. Taking the relative employment reductions in other regions of between 12,480 and 13,641, this would see a relative reduction of employment of between 2,680 and 5,801 workers in the coal industry in 2035.

These estimates are based on some important assumptions. Firstly, Wood Mackenzie assumes the world does not act on climate change – they assume Australian thermal coal exports will increase substantially in either scenario. They see demand for traded thermal coal increasing out to 2035. By contrast, the International Energy Agency expects the traded thermal coal market to decline by 60% to 2040 if the world acts in line with the Paris targets. If these targets are achieved and this decline in the coal trade occurs, the impact of Galilee Basin development on other coal regions is likely to be larger still.

Secondly, the degree and effects of automation are unclear. Galilee Basin employment estimates appear to underestimate proponent intentions to automate. Not only would this produce fewer jobs overall, but these more would be located in capital cities, not in regional areas. A University of Queensland study supported by the mining industry found that mine automation can reduce in-pit roles by 50% and overall mine workforce by 30–40%. This has a particular impact on indigenous employment, which is focused in regional areas rather than capital cities.

Government agencies have not conducted analysis on the impacts of Galilee Basin development on other coal regions. Some stakeholders such as NSW Minister for Resources Don Harwin have even dismissed the need for any analysis, saying he is “comfortable and not concerned about ongoing coal exports”.

Federal and state government economists and coal analysts should investigate the potential impact of subsidised Galilee Basin development in detail as part of a plan for transitioning our coal regions into a carbon constrained future.

The impact of Galilee Basin development 2 Introduction

If the world is to avoid dangero us climate change it w ill use less coal, not more. Indeed, the latest World Energy Outlook from the International Energy Agency states:

Against a background of falling coal use in Euro pe, the United States and China, global coal demand fell by 2% in 2016, for the second year in a row.1

With demand for coal declining, or at best stable, production from new mines w ill come at the expense of existing mines. In Australia, the world's largest coal exporter, large new thermal coal mines in the Galilee Basin would displace some amount of coal production in regions such as the Hunter Valley in NSW and Queensland's Surat and Bowen Basins.

The displacement of coal production also displaces employment in these mines. Making matters worse, Galilee Basi n mines w ill be very large and highly automated, employing fewer people per tonne of coal produced. Replacing relatively job-intensive smaller mines w ith larger, more-automated mines w ill reduce employment. The trend for larger mines to employ fewer people relative to coal production is evident in existing Queensland and NSW mines, shown in Figures 1 and 2 below.

Figure 1: Worker productivity and production, Queensland

... 20,000 j 18,000 • • • ~ 16,000 ai 14,000 • ~ 12,000 QI • •• 2 10,000 • • _g 8,000 ?:' 6,000 • ••• '> ~.. • t: 4,000 .,.-·•• ~· • ~ 2,000 - ...0 Cl. 0 5,000,000 10,000,000 15,000,000 Production (tonnes coal p.a.)

Source: Department of Natural Resources and Mines (2017) Coal industry review tables 2016- 17, htt ps://data. g Id.gov .au/dataset/ coa 1-i nd ustry-review-statistical-tables/ resource/lb7fb643 - c880-42 bf-940b-fc3c582d239d; Queensland Government (2017) Mining industry worker

1 IEA. (2017). World Energy Outlook 2017, p 203. https://www.iea .org/weo2017/

The impact of Galilee Basin development 3 numbers, https://www.business.gld.gov.au/industries/mining-energy-water/resources/safety health/mining/accidents-incidents/safety-performance2

Figure 2: Worker productivity and production, NSW

30,000 ... QI 25,000 ~... • 0 • ::... QI 20,000 Cl.

"'QI C: C: 15,000 0 .:!::. ~ "> 10,000 "B :s "Cl 0 5,000 c....

5,000,000 10,000,000 15,000,000 20,000,000 Production (tonnes coal p.a.)

Source: Department of Resources and Energy (2014) NSW Coal Industry Profile 2014 - Volume 1

The upw ard sloping lines in Figures 1 and 2 show that, in general, larger mines use fewer workers to produce a given amount of coal. The mines proposed for the Ga lilee Basin are far larger than all those represented in Figures 1 and 2. The best known is Adan i's Carmichael mine, which aims to produce 60 million tonnes per year, t hree t imes more t han t he highest produci ng mine in Figure 2.3

Ga lilee Basin proponents are aiming to have highly automated mining operations. Adani has stated t hat it plans to aut omate the Carmichael coa l mine in t he Ga lilee Basin, w it h CEO of Adani Mining Jeyakumar Janakaraj saying:

2 Note: This analysis excludes four outliers. Newlands Suttor Creek would have an output of 19 tonnes per worker, but this is a consequence of the mine winding down product ion in 2016-17. Three other mines - Burton Coal, Commodore and Kogan Creek - all report productivity of over 40,000 tonnes per worker. This is more than double the productivity of the next most productive mines. Commodore and Kogan Creek supply nearby power stations. Burton Coal went into ca re and maintenance. 3 The highest production mine in Figure 2 is BHP's Mt Arthur mine in t he Hunter Valley, which produced 19.88 million tonnes of saleable product ion in 2013-14.

The impact of Galilee Basin development 4

We will be utilizing at least 45, 400-tonne driverless trucks. All the vehicles will be capable of automation. When we ramp up the mine, everything will be autonomous from mine to port. In our eyes, this is the mine of the future.4

The planned automation of the Adani mine (and other Galilee mines) will not only reduce the number employed, but also affect where these jobs are distributed. Existing automation and remote-operation technology has led to mining jobs being concentrated in capital cities. For example, the centralised Iron Ore Operational Control Centre in Perth is one of the pillars of Rio Tinto’s Mine of the Future scheme,5 which has been developing and deploying remote and automated technology for 10 years. One-fifth of the Rio Tinto truck fleet is autonomous, including some iron ore mines that have only autonomous trucks in operation, and new railway tracks will be compatible with fully autonomous rail.6

Despite the political and media focus on Adani and jobs, the extent to which Galilee Basin Development would displace employment in existing Australian mines has not been widely researched. The well-publicised Adani job claims are based on analyses that do not consider this effect. Adani’s preferred 10,000 job claim makes no consideration of the wider coal industry, while Adani’s evidence in the Queensland Land Court estimating direct and indirect average employment increase of 1,464 jobs assumes no change in the coal price and therefore no change to the viability of other Australian coal projects.7

Analysis of how Galilee Basin development would affect other coal producing areas has not been conducted by Australian government agencies. The Department of Industry’s Office of the Chief Economist confirmed in answers to questions on notice in 2017 that it does not conduct analysis on potential price impacts of changes to Australian coal

4 ANZ Business Chief. (2015). Adani Mining: Investing in Queensland. ANZ Business Chief. 13 April 2015. http://anz.businesschief.com/Adani-Mining-Pty-Ltd/profiles/137/Adani-Mining:-Investing-in-Queensland 5 Rio Tinto. (2018). Pilbara: Mine of the Future. http://www.riotinto.com/australia/pilbara/mine-of-the-future-9603.aspx and http://www.riotinto.com/japan/growth-and-innovation-19795.aspx 6 Rio Tinto. (2016). Driving productivity in the Pilbara. http://www.riotinto.com/ourcommitment/spotlight-18130 18328.aspx ; Rio Tinto. (2016) Annual report 2016, p 33. http://www.riotinto.com/documents/RT 2016 Annual report.pdf 7 See GHD (2013) Carmichael Coal Mine and Rail Project SEIS Report for Economic Assessment, http://eisdocs.dsdip.qld.gov.au/Carmichael%20Coal%20Mine%20and%20Rail/SEIS/Appendices/Appen dix-E-Economic-Assessment-Report.pdf and Fahrer (2015) Carmichael coal and rail project: economic assessment, expert report to the Queensland Land Court. Note that Fahrer’s analysis does estimate an impact on other mining projects from increased demand for mining labour and other inputs, but no consideration is given to competition within the coal market.

The impact of Galilee Basin development 5

production. Instead, it conducts “broad analysis on coal markets, including global prices”.8

While Adani and governments have not researched the impact of Galilee Basin development on employment in other coal regions, in 2017, commodity analysts Wood Mackenzie were commissioned by the owners of the world’s largest export coal port, the Port of Newcastle, to model the impact that the development of the Galilee Basin would have on volume of coal produced in other regions in Australia.9 This analysis provides a starting point for estimating employment impacts.

8 Department of Industry, Innovation and Science. (2017). Answers to Questions on Notice, Economics Legislation Committee, 2016-17 Additional Estimates, Question No.: AI-88. 9 Reported in Long, S. (2017). Galilee Basin mines will slash coal output, jobs elsewhere, Wood Mackenzie says. ABC News. 6 July 2017. http://www.abc.net.au/news/2017-07-06/galilee-basin-mining-project-will-reduce-coal-output:- research/8682164

The impact of Galilee Basin development 6

Volume analysis

Wood Mackenzie estimated the impact on other coal regions of the Galilee Basin producing up to 150 million tonnes per annum (Mtpa) of thermal coal. An increase of 150 Mtpa is greater than the capacity of the Adani project alone, but is less than the approximately 200 Mtpa total capacity of all Galilee Basin projects.

The 150 Mtpa would represent an increase in the supply of traded coal of around 15%. Wood Mackenzie estimated that the Galilee Basin production would begin to come online from 2023, keeping coal prices lower than would otherwise have been the case – around $3 per tonne lower in 2026, increasing to $25 per tonne lower in 2030.

These lower prices lead to delays or cancellations of other coal projects in Queensland and NSW under Wood Mackenzie’s modelling. Eleven mines in NSW and eight in Queensland would be affected, seeing production from Hunter, Bowen and Surat basins lower than would have occurred in the absence of Galilee development.

Importantly, Wood Mackenzie’s modelled scenarios effectively assume the world takes little action on climate change. Both scenarios modelled by Wood Mackenzie see world demand for traded thermal coal increase by around 10% to 2035 and Australian thermal coal exports increase substantially. By contrast, the International Energy Agency models the thermal coal trade as declining by 60% in 2040 if the Paris targets are achieved.10 The effect of Galilee Basin development on other coal regions would likely be greater still if policies to reduce emissions are successful.

The Wood Mackenzie analysis focuses on coal volumes and price, rather than on employment impacts. It does not provide an estimate of how many jobs could be affected in New South Wales and other Queensland coal regions if Galilee Basin production proceeds. This question is addressed here firstly by applying average and marginal labour productivity rates in existing mines to Wood Mackenzie estimates of reduced coal production. Secondly, we consider the potential employment numbers of identified mines and proposed mines that will be affected — either delayed or cancelled — due to the price effects and output from the Galilee Basin.

10 International Energy Agency (2017) World Energy Outlook 2017, https://www.iea.org/weo2017/, see Table 5.1 World coal demand, production and trade by scenario, p207

The impact of Galilee Basin development 7

Additionally, the automation of the Galilee coal production chain is likely to affect the location of mining jobs associated with this coal production, with control of automated process likely to be established in capital cities, leading to less regional employment.

The impact of Galilee Basin development 8 Reduced volume

Wood Mackenzie estimat ed t he impact of Galilee Basin development on t he volume of t hermal coal produced by three other coal producing areas, or potential areas: t he Hunter Valley (NSW), the Bowen Basi n and t he Surat Basin (both in Queensland). Figure below summarises the est imat ed f uture declines in coal production in these t hree regions compared with t he scenario of no coal productio n from the Galilee Basin.

Figure 3: Reduced coal production volumes with Galilee Basin production

0 2020 2022 2030 2032 2034 -10

-20 E ::I -30 C C "'... -40 CII c. "'CII -50 C - Hunter reduction C ...0 -60 C - Bowen reduction ~ -70 ~ -80 - Surat reduction

-90

-100

Source: Long, S. (2017). Galilee Basin mines will slash coal output, jobs elsewhere, Wood Mackenzie says

Figure shows that t he Hunter Valley is most affect ed by Ga lilee Basin development, as it has t he most existing t hermal coal mines. The Bowen Basin is least affected, as many of its mines produce high grade metallurgica l coal, a market t hat would be largely unaffected by t he increase in supply of low-grade thermal coal from the Galilee Basin. Wood M ackenzie' s analysis accounts for t he coal quality of different mines.

Figure also shows that coal production in t he Surat Basin is affect ed lat er, as most of its mines are currently little more t han proposals for new t hermal coal mines. Wood Mackenzie expects that in the absence of Ga lilee Basi n production, these Surat Basi n mines w ill come into production in t he late 2020s. Large scale production from the Ga lilee Basin would delay this st art into t he 2030s, which is why Figure shows the effect on Su rat Basi n coal production reducing in that period.

The impact of Galilee Basin development 9

Job displacement

EMPLOYMENT INCREASES IN THE GALILEE BASIN

The Adani coal mine is expected to employ 3,920 people (according to the Queensland Department of State Development).11 This is similar to figures Adani provided in its SEIS, where it said that the mine’s operational workforce would be 3,400–3,800 people for most of its lifespan.12 It is unclear what impact Adani’s plans to fully automate the mine would have on these estimates, which appear to include minimal levels of automation.

60 million tonnes from 3,920 employees is equivalent to 15,306 tonnes per person employed per year. This would make the Adani project the second most productive mine per worker in Australia according to the data in Figures 1 and 2.

Wood Mackenzie assesses Galilee Basin coal production up to 150 million tonnes per year, including Adani.13 Assuming that other Galilee Basin mines have the same labour productivity as the Adani mine is claimed to have, between 7,840 and 9,800 people would be employed per year.

11 Department of State Development, Manufacturing, Infrastructure and Planning. (2018). Carmichael Coal Mine and Rail Project Overview. https://www.statedevelopment.qld.gov.au/assessments-and- approvals/carmichael-coal-mine-and-rail-project.html 12 GHD. (2013). Report for Carmichael coal mine and rail project SEIS – Economic Assessment. http://eisdocs.dsdip.qld.gov.au/Carmichael%20Coal%20Mine%20and%20Rail/SEIS/Appendices/Appen dix-E-Economic-Assessment-Report.pdf Note: The Queensland Land Court heard evidence from Adani based on a 40 million tonne per year version of the project. Peak project employment under that version was estimated at 1,717 people in 2045, with an average over the life of the project around 1,500. 13 Long, S. (2017). Galilee Basin mines will slash coal output, jobs elsewhere, Wood Mackenzie says. ABC News. 6 July 2017. http://www.abc.net.au/news/2017-07-06/galilee-basin-mining-project-will-reduce- coal-output:-research/8682164

The impact of Galilee Basin development 10 IMPACTS ON EMPLOYMENT IN OTHER COAL REGIONS

Average productivity

Employment impacts of Ga lilee Basin development can be estimated in a variety of ways. The simplest is to take existing average labour productivity figures and assume they hold for the mines in each basin.

In 2016-17, Queensland produced 238m tonnes of coa l w ith 30,925 workers - each employee produced on average 7,684 tonnes of coa l.14 The most recent figures available for NSW are for 2013-14, where 22,262 people produced 261.0 million tonnes of saleable coa l, or 8,832 tonnes per person per year on average.15 In Table 1 below, these average labour productivity figures are applied to Wood Mackenzie's estimates of relative reduction in coa l output in each region in 2035:

Table 1: Relative employment reduction with Galilee, average productivity

Region/Time Relative reduction in Productivity (tonnes Relative production (Mtpa) per worker) employment reduction Hunter 86 8,832 9,737 Valley Bowen Basin 17 7,684 2,212 Surat Basin 13 7,684 1,692 Total 116 13,641 Sources: Qld DNRM (2017), NSW ORE (2014), Long (2017)

Table 1 shows that coal mine employment would be expected to be 13,641 lower in the Ga lilee development scenario than under the no-Galilee scenario. Impacts are greatest in the Hunter, 9,737 lower, 2,212 lower in the Bowen Basin and 1,692 lower in the Surat Basin.

14 Queensland Department of Natural Resources and Mines (2017) Coal industry review tables 2016-17, https://data.gld.gov.au/dataset/coal-industry-review-statistical-tables 15 The Coal Industry Profile 2014 breaks down coal production by region, but uses a narrower definition fo r the Hu nter Valley t han t he Wood Mackenzie report does. As such, an overall figu re for NSW has been used. Division of Resources and Energy. (2014). NSW Coal Industry Profile 2014 - Volume 1, p 1, 16-17. https://www.resourcesandenergy.nsw.gov.au/ data/assets/ pdf file/0005/664826/CIP-2014- Vol-1-fina l. pdf

The impact of Galilee Basin development 11 Marginal productivity

Estimates based on averages have the benefit of simplicity, but from an economic point of view the marginal change in coal output per worker is more useful. Productivity may differ due to any economies or diseconomies of sca le in each region.

To est imate the marginal productivity of an additiona l worker at a coa l mine, data from 2011-12 to 2016-17 on Queensland and New South Wales coa l mine output and employed workforce are used to estimate a linear model of the relationship between mine output and workforce, accounting for fact ors such as mine type (underground or open cut) in each coa l region. For each coa l region, the average workforce and output per year is used for each of the mines w here data is avai lable on production and workforce over this period. The equation:

Workforcei = a + f}Coal Outputi + y Undergroundi + &i,j is estimated each i mine in the Bowen Basin, Surat Basin, and Hunter Valley. The output of these regression estimates for each coa l region is in Table , w ith the coa l output variable significant in all regions, and the effect of underground mining, unexpectedly, having little average effect on mine workforce.

Table 2: Regression results for each coal region

Bowen Basin Surat Basin Hunter Valley Coal output (Mt) 121.4... 106.5 ... 106.0*** (,8) Underground (,1 -50.1 NA 161.9* Intercept (a) 130.2 -88.3 -18.8 R squared 0.70 0.76 0.74 N 31 8 40 • significant at 10%, •• significant at 5%, ••• signif icant at 1%. Sources: Queensland Government. (2017). Mining industry worker numbers. https://www.business.gld.gov.au/industries/mining-energy-water/resources/safety health/mining/accidents-incidents/safety-performance: Department of Resources and Energy. (2014). NSW Coal Industry Profile 2014 - Volume 1. https://www.resourcesandenergy.nsw.gov.au/ data/assets/pdf file/0005/664826/CIP-2014- Vol-1-final.pdf.16

16 Note: QLD mines apply average output from 2012-13 to 2016-17 to reported w orkforce in 2014 for Blackwater, Caval Ridge, Clermont Coal, Curragh, Daunia, Ensham OC, Foxleigh, Jellinbah East , M iddlemount, M inerva, Yarrabee, German Creek - Grasst ree, Kest rel, Oaky Creek No 1, Oaky North, Collinsville Opencut, Coppabella, Goonyella - Riverside, Hail Creek, Isaac Plains, Lake Vermont, M illennium, M oorvale, New lands, Peak Downs, Poit rel, Saraj i, South Walker Creek, Carborough Downs, M oranbah North, North Goonyella, Callide & Boundary

The impact of Galilee Basin development 12

In this model the coefficient estimate of each region’s coal output variable is the marginal effect of an additional million tonnes of coal output on jobs for typical mines in that region. The marginal effect relationship can then be applied to Wood Mackenzie’s forecast relative output reductions to estimate the employment impact.

The significant coefficient for coal output in all regions represent the number of jobs related to a 1Mt change in coal output. In the Hunter Valley, for example, there are 106 mining jobs per additional Mt of coal output. Or in other words, an additional worker is associated with an increase in mine output of 9,433 tonnes per year. These relationships between output and workforce in each region that exist in the data for established mines can then be applied to the estimated changes in coal output from Wood Mackenzie to determine an estimate of jobs effect in those regions.

An alternative model specification that did not break coal output into regional associations, but instead applied regional dummy variables, was also tested. The coefficient of 112.3 for coal output, not surprisingly, was around the average of the regional estimates. However, because the Wood Mackenzie estimates of relative volume reduction are regional in nature, the current approach better serves this purpose by matching marginal output and jobs at a coal region level.

Mapping this marginal relationship between coal output and jobs in each region to the relative production reductions estimated by Wood Mackenzie gives the likely job impacts over time in the three regions, shown in Figure 4 below. Note that the dashed lines are the 95% confidence intervals around the coefficient estimates of the coal output variable for each region.

Hill, Cameby Downs, Commodore, Dawson, Kogan Creek, Meandu, and New Acland. NSW mines apply average output from workforce for 2011-12 to 2013-14 for Rolleston, Angus Place UG, Appin UG, Ashton UG, Austar UG, Bulga UG, Chain Valley UG (b), Dendrobium UG, Mandalong UG, Metropolitan UG, Narrabri UG (c), Springvale UG, Tahmoor UG, Ulan UG, Wambo UG, West Cliff UG, West Wallsend UG, Abel UG, Clarence UG, Myuna UG, Bengalla OC, Bloomfield OC, Boggabri OC, Drayton OC, Duralie OC, Hunter Valley Operations OC, Liddell OC, Mangoola OC, Moolarben OC, Mt Arthur Coal OC, Mt Owen OC, Mt Thorley Warkworth OC, Muswellbrook OC, Ravensworth North OC (d), Rix’s Creek OC, Rocglen OC, Stratford OC, Tarrawonga OC, Ulan OC (e), Wambo OC, and Wilpinjong OC.

The impact of Galilee Basin development 13 Figure 4: Coal industry job impacts in affected regions (dashed 95% con. intervals}

~ oo m o rl N rn ~ ~ ~ ~ oo m o rl N rn ~ ~ rl rl rl N N N N N N N N N N rn rn rn rn rn rn 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N N N N N N N N N N 0

-2000

C: 0 -4000 t ::l ""O -6000 . (1.) .. I- .. ..c -8000 . 0 ·...... -10000 ···················· -12000

•••••• Hunter (low) - Hunter •••••• Hunter (high) •••••• Bowen (low) - Bowen •••••• Bowen (high) •••••• Surat (low) - Surat •••••• Surat (high)

As shown in Ta ble 1, Wood Mackenzie's scenario of relatively lower coa l product ion in t hese regions of 116m by 2035 would reduce coal employment by around 12,480 jobs relative t o no-Galilee Basin under cu rrent coa l product ivity figures.

Table 1: Approximate employment losses per region (in 2035)

Region/Time Relative reduction in Assumed productivity Employment production (tonnes (tonnes per employee) reduction p.a.) Hunter 86,000,000 9,432 9,102 Valley Bowen Basin 17,000,000 8,240 2,015 Surat Basin 13,000,000 9,389 1,363 Total 116,000,000 12,480 Notes: Tonnes per employee is one million divided by t he coal output coefficient est imat es for each region.

Table 2 shows that under t his method, relative employment declines would be slightly lower t han under the average productivity method above. The Hunt er would experience 9,100 fewer workers, 2,000 fewer in the Bowen Basi n and around 1,360 in t he Surat Basi n, compared to the no-Galilee development scenario.

The impact of Galilee Basin development 14

Estimated workforce in impacted mines

An alternative approach is to consider the estimated workforces that would be engaged in mines that Wood Mackenzie forecasts will be delayed or scrapped under the Galilee development scenario. Many of these projects have published estimates of their workforce, while others have been estimated using state productivity rates to calculate relative job losses from their expected production declines. The results of this analysis are in Table 2 and 4 below:

The impact of Galilee Basin development 15 Table 2: Employment in impacted Queensland coal mines

Mine Extant Basin Predicted Jobs Jobs coal output (provided} (estimated} p.a. (tonnes} Bowen Basin Drake Y, operating Bow en Gm >15017 Ensham Y, operating Bow en 4.5m 55018 Meteor N, advanced Bow en 1.5m19 195 Downs South Springsure N, advanced Bow en llm 58520 Creek West Y, operating, Bow en 7.5-12.5m21 976- 1,846 Rolleston planned expansion Bowen sub- 30.5- 35.5m 2,456- 3,326 total Surat Basin Collingwood N Surat 6m22 780 The Range N, deposit Surat 6.3m23 820 Wandoan N, deposit Surat 22m24 844 Surat sub- 34.3m 2,444 total Queensland 64.8- 69.Bm 4,900-5,552 Total

17 QCoal Group. (2018). Our Projects: Drake Mine. http://gcoal.com.au/our-projects/drake-mine/ 18 Idemitsu. (2018). Operations: Ensham Resources. https://www.idemitsu.eom.au/operations/ensham-resources/ 19 UD Coal. (2018). Projects: Meteor Downs South. http://www.udcoal. com.au/default.asp ?section id=34 20 DEHP. (2018). Environmental Impact Statement: Springsure Creek Coal Mine Project. Department of Envi ronment and Heritage Protection. Queensland Govern ment. https://www.ehp.gld.gov.au/management/impact-assessment/eis-processes/springsure-creek-coal-project.html 21 Ker, P. (2011). Xstrata gives green light to Rolleston expansion. Sydney Morning Herald. 18 May 2011. http://www.smh.corn .a u/business/x strata-gives-green-li ght-to-rolleston-expansion-20110517-lerd6. htm I 22 State Development. (2018). North Surat - Collingwood Coal Project. Department of State Development, Manufacturing, Infrastructure and Planning. Queensland Government. https://www.statedevelopment.gld.gov.au/assessments-and-approvals/north-surat-col li ngwood-coal-project.html 23 DEHO. (2018). Environmental Impact Statement: The Range Project. Department of Envi ro nment and Heritage Protection. Queensland Government. https://www.ehp.gld.gov.au/management/impact- assessment/eis-processes/the-range.html 24 Xstrata Coa l. (2018). Wandoan Coal Project - Environmental Impact Statement. https://www.statedevelopment.gld.gov.au/resources/project/wandoan-coal-project/eis-integrated exec-su mmary.pdf

The impact of Galilee Basin development 16 Sources: See footnotes for company estimates. Other mines estimated with state-wide productivity average.

Table 3: Employment in impacted Hunter Valley coal mines

Mine Predicted coal Jobs (Coal Jobs output p.a. (tonnes) Industry Profile} (estimated) 473 (current), 275 Austar and modification 3.6m (modification) Dartbrook 4m 453 Ferndale 3m 340 Mt Penny Sm 566 Mt Pleasant Sm 340 Mt Pleasant (new} Sm 906 Mt Thorley 2.Sm 1,300 Mt Thorley (underground} 4m 159 (current), 140 Tarrawonga 2.lm (extension) Vickery 3.6m 200 Wallarah 2 4m 300 Watermark Sm 500 West Muswellbrook 15m 1,69S Total 66.6m 7, 650 Sources: Division of Resources a nd Energy. (2014). NSW Coal Industry Profile 2014 - Volume 1.Note: Mines not estimated in DRE (2014) estimated with state-wide productivity average. In some cases, Wood Mackenzie's predicted coal output is lower than the mine's capacity according to ORE (2014).

Tables 3 and 4 show larger relative declines in output (130 Mtpa instead of 116Mtpa) and similar effects on employment (between 12,550 and 13,420) compared to the estimates above. The main reason for the higher output estimate is that data from government and proponent sources is for peak expected output for each mine. Many of these estimates are likely to be optimistic and in any particular year it is unlikely that all mines would have been operating at their peak. However, the data on mine workforce is more likely to be an average, rather than peak, with some proponents publishing a workforce range instead.

Regard less of the method used, the estimates of relative employment reduction are similar. Somewhere between 12,4SO and 13,641 fewer people would work in Hunter, Bowen Basin and Surat Basi n thermal coa l mines with Galilee Basin development in 2035. The Ga lilee Basin itself would likely employ between 7,S40 and 9,SOO people. Overall, this would see a relative reduction of employment of between 2,6SO and 5,SOl workers in the coal industry overall.

The impact of Galilee Basin development 17

Effects of automation

The sections above base estimates of Galilee Basin mine employment on submissions by Adani to state planning processes. It is unclear what degree of automation those estimates envisage, though the opportunity to automate in new coal basins is greater than in other coal mining regions with established mine and rail infrastructure. This is one of the reasons that there are likely to be net jobs losses in coal mining from development of the Galilee Basin even though there will be a net increase in Australian coal production — coal production from a highly labour-efficient automated ‘mine to port’ system will be offsetting coal production from established coal mining regions with less scope for whole-of-production chain automation. The automation of the Galilee also will affect the location of the jobs it creates, with control of automated functions likely to occur from capital city head offices.

Research from the University of Queensland, partly funded by the mining industry, into autonomous and remote-operated mining outlines a number of likely consequences of these technologies for employment. The research found that, in open pit iron ore mines, a fully autonomous haul truck fleet would reduce in-pit roles by 50%, for an overall decrease in the mine workforce of 30–40%. There are also autonomous drilling rigs and underground equipment that could replace workers.25

Existing remote operations centres have been mostly set up in capital cities, increasing employment there but at the expense of regional centres. The University of Queensland researchers only found one example of a regional town having a remote operations centre at the time of writing in 2013, with the remainder being placed in capital cities. Because of increased competition and lower risk, remote operators working in capital cities may also receive lower salaries. The study found that when remote operations centres were built in capital cities, residential employment near the mines would fall.26

Fewer on site roles, which subsequently reduce the number of mine-related jobs in regional areas, is “likely to reduce town populations, economic activity in the local and regional area and population-driven social services”. In scenarios where remote

25 McNab,K.,et. al. (2013). Exploring the social dimensions of autonomous and remote operation mining: Applying Social Licence in Design. Prepared for CSIRO Minerals Down Under Flagship, Mineral Futures Collaboration Cluster, Sustainable Minerals Institute, The University of Queensland. https://www.csrm.uq.edu.au/publications/exploring-the-social-dimensions-of-autonomous-and- remote-operation-mining-applying-social-license-in-design 26 Ibid.

The impact of Galilee Basin development 18

operations were placed in capital cities, the regional towns saw decreased population, average annual expenditure and services.27

The research also found that automation and remote operations would disproportionately affect Aboriginal Australians, both because a disproportionate share of Aboriginal people are employed in mining (21% of Aboriginal employment in the Pilbara, for example) and because most Aboriginal employees live regionally (up to 90% in some cases). This potentially threatens commitments from both industry and government to increase Aboriginal employment in mining.28

Due to automation and remote control, many of the jobs created in the development of mining in the Galilee Basin are likely to be in major cities, rather than near to the mines themselves.

27 Ibid. 28 Ibid.

The impact of Galilee Basin development 19

Conclusion

Debate around the impacts of future coal development have often focused on the Adani Carmichael mine and the competing claims around how many jobs that project would result in. Despite Adani’s own economist telling the Queensland Land Court that the project would see employment increase by less than 1,500, supporters of the project and the company itself resolutely repeat the fabled 10,000 jobs claim. Prime Minister Turnbull went further still proclaiming “tens of thousands of jobs”.29

None of these estimates consider some basic points. Firstly, the Adani project is unlikely to proceed in isolation. Other projects in the Galilee Basin would be likely to go into production if infrastructure for Adani’s mine is built.

This leads to the second point – the Galilee Basin mines would represent a significant expansion of the traded thermal coal market. This expansion would push down coal prices and see some competing mines not proceed or leave the market. Some of these mines will be in Australia.

Despite these important points, no analysis has been conducted on the impacts of Galilee Basin development on the country’s other main coal producing regions. On the contrary, stakeholders such as NSW Minister for Resources Don Harwin have dismissed the need for any analysis, saying he is “comfortable and not concerned about ongoing coal exports”.30

Harwin’s lack of concern is based on his belief that the lower ash content of NSW coal makes Galilee Basin coal irrelevant to his state. This is like one brewer ignoring a new brewery entering the market because their beer is slightly stronger. If the price of XXXX Gold reduces by 15 percent with the assistance of government subsidies, it is unlikely the makers of Carlton Draft would pay no attention due to their slightly different alcohol contents.

Furthermore, this analysis is based on an assumption of expanding coal demand and export sales when the latest data and many projections are for declines. The Paris Agreement makes it clear that the world needs to burn less coal, not more. The level of

29 Kenny (2017) Adani mine edges closer after Malcolm Turnbull's India visit, https://www.smh.com.au/politics/federal/adani-mine-edges-closer-after-malcolm-turnbulls-india- visit-20170411-gvilmk.html 30 Legislative Council Hansard (2017) Adani Carmichael Coalmine Proposal Impact, https://www.parliament.nsw.gov.au/Hansard/Pages/HansardResult.aspx#/docid/HANSARD- 1820781676-73150

The impact of Galilee Basin development 20

automation that Galilee Basin development would see is also unclear, but appears to be optimistically low in much of the above analysis.

Australia’s governments need to address the question of the likely impacts of Galilee Basin Development. The federal Office of the Chief Economist, NSW Resources and Energy and the Queensland Department of Natural Resources, Mines and Energy should investigate this in detail as part of a plan for transitioning our coal regions into a carbon constrained future.

The impact of Galilee Basin development 21

Suboptimal supercritical Reliability issues at Australia’s supercritical coal power plants

There have been recent calls for Australian taxpayers to subsidise the building of supercritical coal power plants (so-called “HELE” plants), but existing supercritical plants experience frequent breakdowns that affect electricity prices and can push grid frequency outside of safe ranges.

Discussion paper

Mark Ogge Bill Browne January 2019

ABOUT THE AUSTRALIA INSTITUTE

OUR PHILOSOPHY

OUR PURPOSE – ‘RESEARCH THAT MATTERS’

Level 1, Endeavour House, 1 Franklin St Canberra, ACT 2601 Tel: (02) 61300530 Email: [email protected] Website: www.tai.org.au ISSN: 1836-9014

Summary

A number of federal and state politicians and mining industry groups have called for new supercritical or ultra-supercritical coal-fired power stations to be built in the National Electricity Market (NEM).

Data from The Australia Institute’s Gas & Coal Watch shows that coal plants are unreliable and prone to break downs – as they have dozens of times since the Institute began monitoring in 2017.

Furthermore, of Australia’s black coal plants, the supercritical plants have performed just as badly as subcritical plants relative to generating capacity, despite being newer.

A close study of Kogan Creek, Australia’s newest supercritical coal plant, shows that its breakdowns:

1. Occur often, 2. Are the biggest in the NEM, 3. Have contributed to price spikes, and 4. Have caused frequency losses outside of the safe operating band.

The Victorian Nationals, the “Monash Forum” of federal Coalition backbenchers and the Minerals Council of Australia have proposed building supercritical plants in Victoria that would burn brown coal. This raises two concerns. Firstly, Australia’s brown coal plants are more unreliable than its black coal plants and, secondly, supercritical brown plants would still be more emissions intensive than the majority of Australia’s existing coal plants.

Suboptimal supercritical 1

Introduction

In recent years, a number of politicians and mining industry groups have pushed for so- called “high efficiency, low-emissions” or “HELE” coal power stations to be built – either entirely by the government or with government subsidies if new coal plants are not economically viable on their own.

“HELE” is an industry promotional term for supercritical coal plants, which operate above a ‘critical’ temperature and pressure level, in theory making them more efficient and with lower emissions than “subcritical” coal plants. They still have higher emissions than other energy sources like natural gas and renewable energy.

In 2017, Barnaby Joyce (then Deputy Prime Minister) and Minister for Resources Matt Canavan called for the Federal Government to “fund or indemnify” a new plant in Queensland.1 One Nation wants the Queensland government to build a new coal plant in North Queensland, with the federal government paying half of the $3 billion cost.2 The Queensland Resources Council has also called on the federal government to “encourage” investment in a Queensland supercritical plant.3

In 2018, backbench Coalition MPs calling themselves the “Monash Forum”4 called for government assistance for new coal plants, with spokesperson Craig Kelly saying the federal government should be prepared to “build one in its entirety, from scratch”. Craig Kelly nominated the Latrobe Valley in Victoria as the potential site for a new plant, meaning that it would burn brown coal.5 The Victorian Nationals have described

1 Murphy (2017) Coal to stay in energy mix for foreseeable future, says Barnaby Joyce, https://www.theguardian.com/australia-news/2017/jun/18/coal-to-stay-in-energy-mix-for- foreseeable-future-says-barnaby-joyce 2 Daily Mercury (2017) One Nation reveals $1.5b plan for NQ coal power station, https://www.dailymercury.com.au/news/one-nation-reveals-15b-plan-for-nq-coal-power- stat/3261961/#/0 3 Queensland Resources Council (2018) Queensland ideal place for HELE coal investment, https://www.qrc.org.au/media-releases/queensland-ideal-place-for-hele-coal-investment/ 4 Including Tony Abbott, Eric Abetz, Kevin Andrews, George Christensen and Barnaby Joyce. 5 Hasham (2018) A new coal-fired power plant would cost $3 billion, drive up energy prices and take eight years to build, https://www.theage.com.au/politics/federal/a-new-coal-fired-power-plant-would- cost-3-billion-drive-up-energy-prices-and-take-eight-years-to-build-20180403-p4z7jg.html; Chang (2018) Are you willing to pay $4 billion to support ‘clean’ coal-fired power plants?, https://www.news.com.au/technology/environment/climate-change/are-you-willing-to-pay-4-billion- to-support-clean-coalfired-power-plants/news-story/1f1b51d97c0027176c96e5f596860665

Suboptimal supercritical 2

such a plant as “essential”6 and the Minerals Council of Australia ”strongly support” the move, releasing modelling on the emissions intensity of supercritical brown plants that is used in this paper.7

When he was Minister for Energy and Environment, Josh Frydenberg – now Treasurer and deputy leader of the Liberal Party – said new supercritical coal plants “have a role to play” and “the government stands ready to ensure the best possible outcomes in the marketplace if the market itself can’t deliver that”.8 New environment minister Melissa Price has said that she would support a new coal plant being built.9 In the Australian Senate, the Coalition and One Nation voted for the government “to facilitate the building of new coal-fired power stations”.10 The Minerals Council has called for new coal to be built in NSW or Victoria.11

With repeated, prominent and forceful calls for new supercritical coal-fired power stations to be built with taxpayer money, it is important to reflect on the performance of Australia’s existing supercritical coal plants.

6 The Nationals for Regional Victoria (2017) Keeping the lights on in Victoria, http://vic.nationals.org.au/keeping_the_lights_on_in_victoria 7 Minerals Council of Australia (2017) Latrobe Valley HELE plant would deliver reliable, affordable power, https://www.minerals.org.au/latrobe_valley_hele_plant_would_deliver_reliable_affordable_power; Nethercote, Aldred and Gibbons (2017) Securing energy, jobs and Australia’s export advantage, https://www.minerals.org.au/sites/default/files/Latrobe_Valley_Securing_energy_and_jobs_and_Aust ralias_export_advantage_June_2017.pdf 8 Karp (2017) New coal plants have a role in Australia's energy future, Josh Frydenberg says, https://www.theguardian.com/australia-news/2017/aug/13/new-coal-plants-have-a-role-in-australias- energy-future-josh-frydenberg-says 9 Hondros (2018) Environment minister backs Paris targets, open to coal-fired power, https://www.canberratimes.com.au/national/western-australia/environment-minister-backs-paris- targets-open-to-coal-fired-power-20180903-p501eq.html 10 Murphy (2018) Coalition backs Hanson motion for new coal-fired power stations, https://www.theguardian.com/australia-news/2018/jun/27/coalition-backs-hanson-motion-to-build- new-coal-fired-power-stations 11 Evans (2017) Independent report backs modern coal generation for Australia, https://www.minerals.org.au/news/independent-report-backs-modern-coal-generation-australia-0

Suboptimal supercritical 3

Subcritical and supercritical coal- fired power plants

The original “subcritical” coal-fired power plants used coal to boil water, with the steam driving a turbine, which in turn drives a generator to generate electricity. In this process, energy is lost as the liquid water turns to steam.

Since 1957, some coal-fired power plants have been designed to reduce this energy loss – and therefore operate more efficiently – by turning the water into a “supercritical fluid” that has properties of both gas and liquid. “Supercritical” coal plants have the specialised equipment needed to keep water at such a temperature and pressure that it turns supercritical.

The next generation “ultra-supercritical” plants operate at even higher temperatures and pressures and can further reduce energy loss and make the process more efficient. Since the 1990s, some ultra-supercritical plants have been built overseas. The industry hopes to develop “advanced ultra-supercritical” plants that would take it a step further and increase efficiency through even higher temperatures and pressures.

Supercritical plants (including ultra-supercritical plants) require less coal than subcritical plants in order to generate the same amount of electricity. By burning less coal, these plants emit less pollution. This has lead them to be described as “High- Efficiency, Low-Emissions” technology by coal advocates.

However, this is only true relative to other coal plants, as shown in Figure 1.

The most efficient current coal technology, “ultra-supercritical”, still emits upwards of 740 grams of CO2 per kWh of electricity produced. This is more than the standard range for natural gas, of between 430 and 517 grams of CO2/kWh. Australia has never successfully built an ultra-supercritical coal power plant.

Suboptimal supercritical 4 Figure 1: Approximate lifetime emissions intensity of power sources

1,400 • 1,200 ? ~ ...... -" 1,000 ~ • • ~ 'iii 800 I C Q) • .., 600 ·=VI - C 0 'iii ·eVI 400 • w 200

• Estimate • With brown coal as fuel source

""Australia Institute ...... ,,.. ~

Source: See Table 1 below

Exacerbating t his is the proposal by the Victorian Nat ionals, the Minerals Council and the "Monash Forum" of federal Coalition backbenchers to build the supercritical plant in the Lat robe Valley, where it would burn brown coal.

The brow n dots in Figure 1 demonstrate how changing t he fuel source from black to brown coal increases the emissions intensity of different technologies. Research from C0 2CRC shows t hat an "ult ra-supercrit ical" plant burning brown coa l would emit 928 grams C02/ kWh, which is well above the current emissions intensity of t he NEM (around 800 grams C02/kWh), 12 and above the emissions intensity of many of Australia's exist ing subcritical coa l plants. In 2016-17, 10 coal plants in the NEM reported emissions intensity below 928 grams C02/ kWh.13

12 Climate Change Authority (2013) Analysis of electricity consumption, electricity generation emissions intensity and economy-wide emissions, http://climatechangeauthority.gov.au/files/files/Target Progress-Review / An alysis-of-electri city-consumption-electricity-generation-emissions-intensity-and economy-wide emissions/Australia%20electricity",620and%20emissions%20final%20report%202013%2010%2018.pdf 13 Clean Energy Regu lator (2018) Electricity sector emissions and generation data 2016- 17, http://www.cleanenergyregulator.gov.au/NGER/National%20greenhouse%20and%20energy%20repor

Suboptimal supercritical 5 In ot her words, as illust rated in Figure 2, state-of-the-art, brand new "High Efficiency, Low Emissions" coal plant s burning brown coal would be no more efficient or lower emissions than some of Australia's oldest subcritical black coa l plant s - whet her or not they are "ult ra-supercritical" . As Figure 1 demonstrated, even ult ra-supercritical plants burning black coal (i.e., the most efficient existing coal technology burning the "cleaner" variety of coal) are far closer in efficiency and emissions t o other coal plants than they are to nat ural gas, which is itself a polluting fossi l fuel.

Ca lling any coal plant "High Efficiency, Low Emissions" is at best inaccurate, and at worst, a deli berate attempt to muddy the waters.

Figure 2: Emissions intensity, current coal plants (2016-17) and proposed brown supercritical plants

1,400 2 ~ 1,200 ...... -"' N 0u 1,000 ~ > 800 'iii... C ...Q) 600 ·=VI 400 C 0 'iii ·eVI 200 w

lh1Australia Institute a,-.r.,,.. ~

Source: Clean Energy Regulator (2018) Electricity sector emissions and generation data 2016- 17; Nethercote, Aldred and Gibbons (2017) Securing energy, jobs and Australia's export advantage; C02CRC (2016) Australian power generation technology report, p 119, http://www.co2crc.corn.au/wp-content/uploads/2016/04/LCOE_Report_final_web.pdf

t i ng°.-6 20data/elec t ricity-sector-emissions-and-generation -data/e Iec t ri cit y-sect or- emissions-and generat ion-data-2016-17

Suboptimal supercritical 6 Table 1: Emissions intensity by generation type

Generation type Estimate (grams (02/kWh) Subcritical 2:880 (black coal) Up t o 1,306 (brown coal) Supercritical 80~ 880 (black coal) 953 (brown coal) Ultra-supercritical 74~800 (black coal) 928 (brown coal) Advanced ultra-supercritical (not commercially 67~ 740 (black coal) deployed) 750 (brown coal) Natural gas 43~ 517 Hydro-electric 4 Wind 3- 22 Solar PV 5~150 'h

Source explanation: Black coal subcritical, supercritical and ultra-supercritical ranges are from the World Coal Association's High efficiency low emissions coal resource. The advanced ultra supercritical figure for brown coal is from the figure for BOA Plus in Securing energy, jobs and Australia's export advantage, p 16. Supercritical and ultra-supercritical figures for brown coal are from Australian power generation technology report, p 119. The subcritical figure for brown coal is Yallourn Power Station's emissions intensity for 2016- 17. Figures for natural gas and renewables are from 1 kilowatt-hour.

Sources (Table 1 and Table 2): IEA (2016) An overview of HELE technology deployment in the coal power plant fleets of China, EU, Japan and USA; World Coal Association (n.d.) High efficiency low emissions coal, https://www.worldcoal.org/reducing-co2-emissions/high efficiency-low-emission-coal; Molyneaux (2017) Is 'clean coal' power the answer to Australia's emissions targets?, https://theconversation .co m/is-clean-coal-power-the -answer-to-australias emissions-targets-71785; Holmes A Court (2017) How clean are Australia's 'clean coal' power stations?, https://reneweconomy.corn .au/clean-australias-clean-coal-power -stat ions-14224 /; BlueSkyModel (n.d.) 1 kilowatt-hour, http://blueskymodel.org/kilowatt-hour; Nethercote, Aldred and Gibbons (2017) Securing energy, jobs and Australia's export advantage; Jotzo and Mazouz (2015) Farewell to brown coal without tears: How to shut high-emitting power stations, https://theconversati on .com/farewe 11-to-brown-coal-without-tears-how-to-shut-h igh-emitti ng power-stat ions-50904; C02CRC (2016) Australian power generation technology report, http://www.co2crc.corn.au/wp-content/uploads/2016/04/LCOE_Report_fina1_web.pdf

Note: Where possible, figures are for lifecycle emissions and/or based on electricity "as generated". Because power stations consume some share of energy themselves (as "auxiliary power"), the actual emissions intensity of "sent out" energy is likely to be higher.

Subopt imal supercritical 7 Table 2: Pressure and temperature ranges for coal plant technologies

Temperature Pressure Efficiency (LHV, net) Subcritical Up to 560 degrees l ess t han 22.1 Up t o 38% Celsius MPa Supercritical 54~580 degrees 22.1-25 M Pa Upto 42% Celsius Ultra-supercritical Greater t han 580 Greater t han Upto45% degrees Celsius 25 MPa Advanced ultra- Greater t han 620 Greater t han 45- 50% supercritical degrees Celsius 32 MPa '""Australia Institute 1,1...,..., ~t..cmcl<"'I,

Source explanation: Subcritical, supercritica l and ultra-supercritical ranges are from Securing energy,jobs and Australia's export advantage, p 13, and the World Coa l Association's High efficiency low emissions coal resource.

Suboptimal supercritical 8 Many breakdowns at supercritical plants

While supercritica l plants are higher efficiency than subcritical plants (when burning similar fuels), this is in physical terms: they are better at converting input energy into useful output energy. They are not necessarily superior to subcritical plants in practical or economic terms. Supercritical plants can have higher capital costs, require more complicated and expensive components and be less able to " ramp" up and down - in other words, slower to respond to changes in demand.

These limitations can cause problems for electricity consumers. For example, boiler tube leaks are the main causes of breakdowns at coal plants.14 Higher pressures and temperatures, like those seen in supercritical plants, w ill put greater stress on coal plant boilers. These greater temperatures and pressures could be a reason for the high rate of coal breakdowns at the newer supercritical power plants in Australia.

Australia has four coa l power plants that have been built in the last 20 years, all of which are in Queensland. All of these are su percritical power stations.

Table 3: NEM supercritical coal plants in Queensland

Power Station Age (Years) Callide Power Plant 18 Millmerran Power Station 17 Tarong North Power Station 17 Kogan Creek Power Station 12 Source: Senate Environment and Communications References Committee (2017) Retirement of coal fired power stations: Final report, p 3, https://www. aph.gov .au/Parliamentary_ Business/Committees/Senate/Environment_ and_ Com munications/Coal_fired_power_stations

Other than these four power stations, all other black coal power plants in the NEM are older subcritical plants.

14 Bamrotwar and Deshpande (2014) Root Cause Analysis and Economic Implication of Boiler Tube Failures in 210 M W Thermal Power Plant, htt ps://www.scribd.com/document/306366367/RCA -of Boiler-Tube-Failure-in-210-MW-plant

Suboptimal supercritical 9 The Australia Inst it ute began monitoring breakdowns of gas and coal plants in t he NEM in late 2017. In 2018, there have been 74 breakdowns at black coal power plants in t he NEM, approximately one every five days.

The older subcritical plants have enormous issues wit h reliability. This is illustrated by the NSW "energy crisis" in June t his year.15

New South Wales has no new supercrit ical coal power plants. All are old subcritical plants between 27 and 48 years old. In early June 2018 they failed spectacularly when up to almost half the New South Wales fleet was offline during peak demand periods, triggering a power "crisis" t hat resulted in five price surges to over AUD 2,400 per MWh wit hin a few days.

Despite t he decidedly low bar set by the antiquated fleet of subcrit ica l coal power plants in the NEM, the newer supercritical power plants are just as unreliable.

In 2018, t hese plants have broken down more often than the older subcritical plants.

Of the 74 breakdowns at black coal power in 2018, 61 have been at subcritical black coal plants and 13 have been at the newer supercritical plants.

However, the older subcritical power stat ions make up a far larger proportion of t he capacity of t he NEM (30%), wit h the supercritical plants making only up 6%.

As shown in Table 4 below, there have been 4.4 breakdowns per gigawatt of capacity at supercrit ica l plants in the NEM over this period compared to 4.0 breakdowns per gigawatt of capacity at the older subcritical black coal plants.

Table 4: NEM unit trips (2018)

Group Capacity Share Breakdowns %of Breakdowns/ (GW) of NEM breakdowns GW capacity Subcritical 15.4 30% 61 45% 4.0 black Supercritical 2.9 6% 13 10% 4.4 black Subcritical 4.7 9% 44 33% 9.4 brown Gas 12.0 24% 17 13% 1.4 Total 35.0 69% 135 100% 3.9 Tota/NEM 50.5 capacity

15 Ogge (2018) Coalapse! The New South Wales winter "energy crisis"

Suboptimal supercritical 10 'h

As shown in Figure 3 below, t he rate of breakdowns of t he newer supercrit ica l plants is higher t han that of the older subcritical plants.

Figure 3: Breakdowns at black coal plants in the NEM per gigawatt of capacity (2018)

5.0 4.4 4.5 > 4.0 ·15 4.0 "'Q. ~ 3.5 ~ 3.0 8. 2.5 l£ 2.0 ;: ..g 1.5 .>I! ; 1.0 al 0.5 0.0 Subcritical black Supercritical black

!!>,Australia Institute ...... ,.,~

Source: Calculations based on The Australia lnstitute's Gas & Coal Watch

It is wort h emphasising t hat both subcritical and supercritical black coal plants have performed better than Victoria's brown coal plants, which broke down 9.4 t imes per GW of capacity. Despite this, Coalition backbenchers and t he Minerals Council of Australia have specifically called for new brown coal supercritical plants t o be built . This would couple the less reliable technology-supercritical - with the less reliable fuel type - brown coa l.

Suboptimal supercritical 11 The hapless HELE: Problems with Australia's newest coal plant

Kogan Creek Power Station deserves particular st udy because - despite being t he newest coal plant in t he count ry- its breakdowns are frequent and often the largest in the NEM, causing price spikes and frequency losses.

Built in 2007, Kogan Creek is "one of Australia's most efficient and technically advanced coal-fired power stations".16 It is also one of the more unreliable power stations in t he NEM, having broken down on seven occasions since mid-December last year, including the t hree largest single breakdowns in the NEM since monitoring began.

Table 5 below shows the breakdowns at supercrit ical coal power stations in t he NEM since mid-December 2017.

Table 5: Supercritical plant breakdowns, 13 December 2017 to 31 December 2018

Plant Date Generation actually Registered capacity of lost (MW) unit lost (MW) Millmerran I 13/ 12/ 2017 "'580 426 Kogan Creek 23/ 12/ 2017 350 744 Millmerran 01/ 01/ 2018 156 426 Kogan Creek 11/ 01/ 2018 195 744 Callide Power Plant 16/ 01/ 2018 405 420 Callide Power Plant 09/ 02/ 2018 406 420 Millmerran 19/ 02/ 2018 417 426 Tarong North 03/ 03/ 2018 255 443 Kogan Creek 18/ 04/ 2018 "'750 744 Callide Power Plant 30/ 04/ 2018 "'400 420 Kogan Creek 05/ 06/ 2018 750 744 Kogan Creek 16/ 06/ 2018 752 744 Kogan Creek 13/ 08/ 2018 "'286 N/ A* Kogan Creek 13/ 12/ 2018 334 N/ A* Tarong North 18/ 12/ 2018 442 450 'h

16 CS Energy (n.d.) Kogan Creek Power Station, https://www.csenergy.corn.au/what-we-do/generating energy/ koga n-creek-power- station

Suboptimal supercritical 12

Notes: 13 of the 15 breakdowns were unit trips. The (*) marks a decrease, which did not cause the entire unit to be lost. The registered capacity of plants is typically lower than the maximum capacity, so for example Kogan Creek’s capacity is given here as 744 MW although it is seen generating more.

As shown in Table 5, Kogan Creek Power Station had seven breakdowns over this period, more than any other supercritical plant. Kogan Creek consists of one generating unit – the largest single unit in the NEM. This means that each breakdown resulted in the single largest loss of capacity of any breakdown in the NEM. In the case of three breakdowns, the unit was at full capacity – meaning that the NEM suddenly lost upwards of 750 MW of generation that it was relying on. In the other three cases, the unit had already been generating below capacity when it broke down.

The breakdowns at Kogan Creek Power Station on 18 April, 5 June and 16 June are shown in Figure 4, Figure 5 and Figure 6 below. The dark shaded area of the charts shows the output remaining fairly constant at around 750 MW before suddenly and unexpectedly dropping to zero. These breakdowns are the three largest breakdowns in the NEM since Gas & Coal Watch began monitoring in mid-December 2017. Since Kogan Creek is a single generating unit, each of these unit trips represents the loss of all generation from Kogan Creek.

Figure 4: Kogan Creek unit trip of 18 April 2018

Suboptimal supercritical 13

Figure 5: Kogan Creek unit trip of 5 June 2018

Figure 6: Kogan Creek unit trip of 16 June 2018

Source: OpenNEM

Note: The date on the figure is 15 June as the graph begins in the afternoon of the previous day.

Suboptimal supercritical 14

GRID FREQUENCY DISRUPTIONS

When sudden decreases in supply push grid frequency out of its safe range there are a number of risks, including damage to equipment on both the power generation and demand sides. As the largest single generator in the NEM, and with its record of breakdowns, Kogan Creek power station poses a particular threat to grid frequency.

If supply exactly meets demand, the frequency of the power system is 50 Hertz (Hz). Because demand and supply never remain exactly matched, routine frequency fluctuation is between 49.85 and 50.15 Hz (the “normal operating frequency band”).

When a gas or coal plant breaks down, the frequency will often fall below 49.85 Hz, at which point new supply needs to be brought on quickly to restore the frequency. The Frequency Control Ancillary Services market is activated to address the fall in frequency.

The lowest level of frequency that is acceptable when there is a contingency event like a power plant breakdown is 49.75 Hz (the “normal operating frequency excursion band”).

As can be seen in Figure 7 below, the sudden breakdown at Kogan Creek on breakdown on 18 April this year caused a drop in frequency to well below the acceptable lower limit of a secure power system.

Suboptimal supercritical 15 Figure 7: Frequency impact of Kogan Creek unit trip of 18 April 2018

Kogan Creek Power Station 18Apr2018

------r------~------~------

49.8

49.6

700

600

- son ~ ~ 400 s- 8 300

200

100 'h

0 18:00 19:00 20:00 21:00 22:00 23:00 Time

Source: OpenNEM

PRICE IMPACTS

The larger and more sudden the loss of power from a coal breakdown, the more disrupt ive it is to t he elect ricity supply. When coal plant breakdowns cont ribute to or cause spikes in wholesa le electricity prices, these price increases are ult imately passed on to consumers.

5 June 2018 was a day of relat ively high winter demand in Queensland. Supply was already tight as another supercrit ica l coal plant, Tarong North, was not operating.

Figure 8 below shows the Queensland electricity demand plotted against the wholesale electricity price on 5 June this year. The beginning of t he 5 June breakdown at Kogan Creek Power Station is indicated by the line.

Suboptimal supercritical 16 The loss of Kogan Creek's entire 750 MW of capacity around 12:20pm occurred in a period of relatively low demand. However, Kogan Creek did not come online again by evening, meaning t hat when the peak demand t rading interval occurred at 6:30pm prices surged to over AUD 2,000 per MWh. Had Kogan Creek st ill been generating, there would have been an extra 750 MW of supply helping to keep prices down.

Figure 8: Queensland electricity demand (orange) and price (blue) on 5 June 2018

8,000 2,500

7,000 2,000 6,000

5,000 1,500 0 ~ ::> ~ 4,000 <(

Kogan Creek unit trip 1,000 3,000 begins: 12:20pm

2,000 500 1,000

0 0 0:00 6:00 12:00 18:00 0:00

""'Australia Institute ...... ,... .._....,,

Source: OpenNEM

Table 6 shows t he output of all of Queensland's power stations during this t rading interval and price surge. During this period t he average wholesale electricity price was AUD 2,175 per MWh. During this interval another supercritical power plant, Tarong North, was also offline - as was t he combined cycle gas power stat ion at Swanbank.

Suboptimal supercritical 17 Table 6: Output of QLD gas and coal power plants June 6 2018, 18:00-18:30 hr

Power Station Technology Registered Average Difference Capacity Output Barcaldine Gas (CCGT) 37 0 37,0 Braemar Gas (OCGT) 504 506.4 -2.4 Braemar 2 Gas (OCGT) 519 289.2 229.8 Callide Black coal 760 662.5 97.6 Callide C Nett Off Black coal 840 619.7 220.3 CondamineA Gas (CCGT) 143 42.7 100.3 Darling Downs Gas (CCGT) 643 475.2 167.8 Gladstone Black coal 1,680 1,050.4 629.6 Kogan Creek Black coal 744 0 744.0 Millmerran Power Plant Black coal 852 843 9.0 Oakey Gas (OCGT) 282 170.6 111.4 Roma Gas Turbine Station Gas (OCGT) 80 70.2 9.8 Stanwell Black coal 1460 1,283.3 176.7 Swanbank B & Swanbank E Gas Gas (CCGT) 385 0 385.0 Turbine Tarong Black coal 1,400 1,253.3 146.7 Tarong North Black coal 443 0 443.0 Townsville Gas Turbine Gas (OCGT) 242 238.9 3.1 Yarwun Gas (CCGT) 154 159.8 -5.8 Total (Gas) 2,989 1,953.0 1,036.0 Total (Coal) 8,179 5,712.1 2,466.9 Total 11,168 7,665.1 3,502.9 . . . .

Source: OpenNEM

Suboptimal supercritical 18

Conclusion

Energy policy should improve reliability, reduce energy prices and reduce emissions. Building new coal plants in Australia will introduce unreliable, expensive and polluting power plants.

There are four coal plants in Australia built within the last twenty years. In 2018, these supercritical plants have broken down at a higher rate than the antiquated subcritical black coal plants in the NEM, relative to capacity. This is despite serious reliability issues with the subcritical black coal fleet as evidenced by the “energy crisis” in New South Wales in June this year.

Australia’s newest black coal power plant at Kogan Creek in Queensland is particularly unreliable, having experienced seven breakdowns since mid-December last year, including the three largest breakdowns in the NEM.

A particular focus on two of Kogan Creek’s breakdowns reveal the effects that coal unreliability has on the electricity market as a whole.

The Kogan Creek breakdown on 18 April this year caused a drop in frequency to below the acceptable level for a secure electricity system.

The Kogan Creek breakdown on 5 June this year contributed to a massive price spike during the period of highest demand.

Australia is experiencing a boom in renewable energy. The September 2018 issue of the National Energy Emissions Audit reports that by the end of 2020 there will be 41% more wind generation capacity attached to the National Electricity Market, and almost three times as much solar capacity as there currently is. The new renewables generation will equal the total annual output from Eraring coal plant, Australia’s largest power station, and be double the Liddell coal plant’s current output.

Building new coal power plants at this point would displace renewable energy and lock in far higher emissions for decades to come, at a time when Australia is experiencing the devastating impacts of global warming.

Suboptimal supercritical 19

The heat goes on Breakdowns at gas and coal plants in NSW, 2018

So far in 2018, there have been 27 major breakdowns at gas and coal power stations in NSW. Every coal power station experienced at least one breakdown. The Tallawarra gas power station experienced three breakdowns. Aging plants Liddell and Vales Point experienced the most breakdowns.

Discussion paper

Mark Ogge Bill Browne January 2019

ABOUT THE AUSTRALIA INSTITUTE

OUR PHILOSOPHY

OUR PURPOSE – ‘RESEARCH THAT MATTERS’

Level 1, Endeavour House, 1 Franklin St Canberra, ACT 2601 Tel: (02) 61300530 Email: [email protected] Website: www.tai.org.au ISSN: 1836-9014

Summary

This year, The Australia Institute’s Gas & Coal Watch identified 27 major breakdowns at gas and coal power stations in New South Wales (NSW), each one removing hundreds of megawatts of capacity from the system, sometimes for hours at a time.

Gas and coal plants can break down in the heat, and older coal plants are particularly vulnerable. In addition, extreme heat drives high demand, meaning that the fossil fleet is most likely to break down at times when people need it most.

The breakdowns at coal and gas plants over summer were not only at NSW’s old coal power plants, but also at the “state-of-the-art” Tallawarra plant, which is less than a decade old.

There were 24 breakdowns at black coal power plants and three at the Tallawarra gas plant. This is the equivalent of more than one breakdown every fortnight through the year.

Figure 1: Overall breakdowns (NSW, 2018)

25 24 20

Breakdowns 10

5 3 0 Black coal Gas

The heat goes on 1 Figure 2: Breakdowns per GW of capacity (NSW, 2018)

2.5

> ·~- 2.0 c.. ro u sl9 1.5

1,... (1.) c.. ~ 1.0 ~ 0 ""O .:.t:. ro (l.) 0.5 I- co

0.0 Black coal Gas

""Australia Institute ~ ... .,1)11~.

Table 1: Breakdowns by fossil fuel type, share of capacity

Group Capacity Share Breakdowns Share of Breakdowns of NSW breakdowns per GW Black coal 10.2 GW 60% 24 89% 2.4 Gas 2.3 GW 14% 3 11% 1.3 Fossil fuels 12.SGW 74% 27 2.2 NSW capacity 17.0GW ""Australia Institute ...... h.~.

Note: The remaining capacity in NSW is mostly from renewables.

The heat goes on 2

Introduction

This report summarises the results for NSW from Gas & Coal Watch between 1 January and 31 December 2018. It identifies 27 breakdowns, including 25 unit trips. A unit trip is one of a power plant's generating units being taken off the grid suddenly (and typically without warning). Two breakdowns in 2018 were in the form of sharp, sudden decreases in electricity output that did not involve a unit being taken totally offline.

Three-quarters of NSW’s electricity generation capacity consists of fossil fuel generators: five black coal plants and five main gas plants.1

The heat particularly affects thermal electricity generation because the efficiency of thermal generation depends on temperature extremes between input and output. Closed-system generators typically use water for cooling, and during periods of extreme heat power stations can fail if the water from the cooling tower is too warm, if access to water is limited, or if the discharged water being pumped out of the cooling tower is too hot.2 About two-thirds (65 per cent) of generating capacity in the NEM depends on water for cooling coal and gas fired power stations.3 Air-cooled plants are less efficient overall, and lose efficiency in the heat.

As global warming results in more hot days, this vulnerability exacerbates. This is compounded by increased demand for electricity on hot days.

1 There is about 0.3 GW of gas generation not covered by the nameplate capacity of the five main gas plants: AEMO (2018) Generation Information Page, https://www.aemo.com.au/Electricity/National- Electricity-Market-NEM/Planning-and-forecasting/Generation-information 2 Union of Concerned Scientists (2011) Energy and Water in a Warming World: Freshwater Use by US power plants, http://www.ucsusa.org/clean_energy/our-energy-choices/energy-and-wateruse/freshwater-use-by-us-power-plants.html#.WfEcCohx3IU 3 Smart and Aspinall (2009) Water and the electricity generation industry, Australian Water Commission

The heat goes on 3

Overall breakdowns

Black coal was the worst performer in NSW, breaking down 21 times in 2018. The Tallawarra gas plant was the only gas plant to break down – but it broke down three times. Together, this represents a gas or coal breakdown more than once a fortnight through the year 2018.

Figure 3: Overall breakdowns (NSW, 2018)

25 24 20

Breakdowns 10

5 3 0 Black coal Gas

Absolute figures can be misleading, because black coal in NSW contributes more than five times the capacity of gas. Taking capacity into account, black coal still performed worse, with 2.1 breakdowns per GW of capacity. Gas had 1.3 breakdowns per GW capacity.

The heat goes on 4 Figure 4: Breakdowns per GW of capacity (NSW, 2018)

2.5

> ·~- 2.0 c.. ro u sl9 1.5

1,... (1.) c.. ~ 1.0 ~ 0 ""O .:.t:. ro (l.) 0.5 I- co

0.0 Black coal Gas

""Australia Institute ~ ... .,1)11~.

The table below shows the full details of breakdowns by fossil fuel group and share of capacity.

Table 2: Breakdowns by fossil fuel type, share of capacity

Note: The remaining capacity in NSW is mostly from renewables.

The heat goes on 5 Coal

Australia's 16 coal plants are responsible for almost ha lf (48%) of the NEM's capacity, or 30 GW. Coa l is even more overrepresented in NSW, w here it consists of 60% of generation capacity to gas' 14%.

Table 3 shows breakdowns at each NSW coa l pow er station during 2018. All coal plants experienced breakdowns.

Table 3: Coal power station breakdowns, NSW 2018

Name Breakdowns Capacity (MW) Breakdowns per GW capacity Bayswater 3 2,640 1.1 Eraring 4 2,880 1.4 Liddell 11 2,000 5.5 Mt Piper 1 1,320 0.8 Vales Point 5 1,320 3.8 Total 21 10,160

Liddell and Vales Point experienci ng the most breakdow ns (10 and five respectively) and the most breakdowns per GW of capacity (5.5 and 3.8 respectively). They are also the two plants that federal politicians have proposed extending beyond their normal operating life.

In late 2017, then Prime Minister Malcolm Turnbull called on AGL to keep the aging Liddell Power Station open.4 Then Treasurer Scott Morrison, now Prime Minister, had said earlier that it was "very important" to keep Liddell open.5 Former Prime Minister Tony Abbott said that the government should compulsorily acquire Liddell as part of plans to keep it open.6 After the change in Prime Minister to Scott Morrison, new Energy Minister Angus Taylor warned that the Federal Government might force AGL to

4 Yax ley and Lowrey (2017) Malcolm Turnbull in talks with AGL to keep Liddell coal power station operating beyond 2022, https://www.abc.net.au/news/ 2017-09-0S/turnbull-in-talks-with-agl-keep liddell-coal-power-station-open/8874874 5 Slezak and Knaus (2017) Liddell power station: five extra years could give government $1bn rehab bill, https ://www.theguard ia n .corn/au st ra Iia -news/ 2017/ sep/08/liddell -power- station-five-extra-years cou Id-give-govern ment-l bn-reha b-bi 11; Grattan (2017) Government leans on AGL over Liddell ahead of meeting, https://theconversation .corn/government -lea ns-o n-agl-over- Iiddel I-a hea d-of-meeti ng-83778 6 Murphy (2018) AGL rejects Alinta's bid for Liddell power plant, confirming its closure, https ://www.theguard ia n .corn/au st ra Iia -news/ 2018/may /2 1/ agl-rejects-a Ii ntas-bid-for- Iiddel I-power- plant-confirming-it s-closure

The heat goes on 6

sell Liddell to prevent its closure.7 Despite changes in its executive, AGL has consistently said that it will close Liddell in 2022.8

Owner Delta Electricity is considering extending the life of Vales Point by 20 years, from its current closure date of 2029 to the early 2030s or even 2049.9 Energy insiders speculate that it would be the likely target of a government-underwriting proposal.10

Figure 5: Breakdowns per GW capacity, by plant

6.0 5.5 5.0

4.0 3.8

3.0

2.0 1.4 1.1 1.0 0.8 Breakdowns per GW capacity GW per Breakdowns - Mt Piper Bayswater Eraring Vales Point Liddell

Liddell and Vales Point are also the oldest coal plants in NSW, with their current generators being commissioned in 1971 (for Liddell) and 1978 (for Vales Point). There is a clear trend with the older plants experiencing more breakdowns (per GW capacity) than the newer plants.

7 McCarthy (2018) The power station offloaded by the NSW Government for $1 million suddenly has a future, https://www.theherald.com.au/story/5632203/powering-on-delta-electricitys-plan-for-a-70- year-old-vales-point-power-station/ 8 Latimer (2018) AGL says it remains committed to closing Liddell power plant in 2022, https://www.smh.com.au/business/companies/agl-tells-shareholders-it-will-close-liddell-power-plant- in-2022-20180926-p50633.html 9 McCarthy (2018) The power station offloaded by the NSW Government for $1 million suddenly has a future, https://www.theherald.com.au/story/5632203/powering-on-delta-electricitys-plan-for-a-70- year-old-vales-point-power-station/; Latimer (2018) Power grab: Rich lister eyes partner's share in coal power station, https://www.smh.com.au/business/companies/power-grab-rich-lister-eyes-partner-s- share-in-coal-power-station-20180703-p4zp7r.html 10 Murphy (2018) Underwriting coal power exposes taxpayers to billions, industry group says, https://www.theguardian.com/australia-news/2018/nov/16/underwriting-coal-power-exposes- taxpayers-to-billions-industry-group-says

The heat goes on 7

Figure 6: Breakdowns at coal plants by age

6.0

Liddell

5.0

4.0 Vales Point

3.0

2.0 Breakdowns per GW capacity GW per Breakdowns Eraring Bayswater 1.0 Mt Piper

0.0 1970 1980 1990 2000 2010 2020 Year commissioned

The heat goes on 8 Gas

About 40 gas plants in NSW, Victoria, Queensland, SA and Tasmania contribute 11.6 GW to the NEM, 24.0% of its total generation capacity.11 Gas provides a smaller share of NSW capacity, just 14%.

In 2018, one gas plant -Tallawarra - experienced three breakdowns. Since the other gas plants did not experience breakdow ns, this means gas in NSW experienced fewer breakdow ns than coa l by plant and by capacity.

However, Ta llawarra's breakdowns make it the least reliable plant in NSW, w ith 7.1 breakdow ns per GW of capacity - greater than Liddell's 5.5 or Vales Point's 3.8.

Described as "state-of-the-art" with "fast-start capability", the Ta llawarra plant was only commissioned in 2009.12 Ta llawarra uses the new Combined Cycle Gas Turbine (CCGT) technology that allows it to be used for bulk electricity supply as well as dispatchable energy.

As w ell as failing three times this year, Ta llawarra failed in Summer 2016-17 w ith dramatic consequences outlined in our report Can't stand the heat.13

Table 4: Gas power station breakdowns, NSW 2018 ~~Giui·-:H¥iMt·i1W\,.ii.£iiMM(~'l!:H¥iMt·i'Jhti·i4iib'1¥i·SM~ _Tallaw~ 3_ 420_ 7~ Note: This table only shows the gas station that had a breakdown. There are about five gas stations in NSW, depending on classification.

11 Total NEM coal capacity 22,916 MW minus Victorian brown coal capacity 4,630 MW = 18,286 MW. Total existing generation capacity is 48,352 MW. AEMO (2018) Generation Information Page, https ://www. a emo.corn.au/E lectricity/Nationa I-Elect ricity-Market-NEM/Pla n n ing -a nd forecasti ng/Generation-information 12 Energy Australia website, Tallawarra Power Station, Accessed 23/04/18, https ://www. energya ustra Iia .corn .au/a bout- us/ energy-generation/ta Il awa rra-power -station 13 Ogge (2017) Can't stand the heat, http://www.tai. org.au/content/coal-and-gas-reliability-liability heat-report

The heat goes on 9

Figure 7: Breakdowns per GW capacity, by plant – including Tallawarra

8.0 7.1 7.0 6.0 5.5 5.0 3.8 4.0 3.0

2.0 1.1 1.4 0.8 1.0 Breakdowns per GW capacity GW per Breakdowns - Tallawarra Mt Piper Bayswater Eraring Vales Point Liddell

The heat goes on 10

Conclusion

Gas and coal power stations broke down more than once a fortnight on average in 2018. Coal plants broke down more often than gas plants, with the two oldest plants – Liddell and Vales Point – breaking down the most. These are the plants that politicians have proposed keeping open beyond their scheduled closure dates.

While gas outperformed coal overall, the “state-of-the-art” Tallawarra plant is the single worst performing plant in NSW, with 7.1 breakdowns per GW of capacity – more than Liddell or Vales Point.

Gas and coal have been tested, and they have been found wanting. As climate change worsens, there will be more heatwaves, putting more pressure on fossil fuel generation.

If NSW is to have reliable electricity generation, heat-sensitive gas and coal plants should be phased out in favour of renewable energy and storage.

The heat goes on 11

Meltdown 2018 Breakdowns at gas and coal plants over 2018

In 2018 there were 135 major breakdowns at gas and coal power stations in the National Energy Market. While the oldest coal plants were responsible for a large proportion of the breakdowns, newer supercritical plants were also unreliable. There were three breakdowns at one of the newest gas plants. Victoria’s brown coal plants were the least reliable overall.

Discussion paper

Mark Ogge Bill Browne January 2019

ABOUT THE AUSTRALIA INSTITUTE

OUR PHILOSOPHY

OUR PURPOSE – ‘RESEARCH THAT MATTERS’

Level 1, Endeavour House, 1 Franklin St Canberra, ACT 2601 Tel: (02) 61300530 Email: [email protected] Website: www.tai.org.au ISSN: 1836-9014

Summary

In 2018, The Australia lnstitute's Gas & Coal Watch identified 135 major breakdowns at gas and coal power stations in t he National Elect ricity Market (NEM), each one removing hundreds of megawatts of capacity from t he system.

Gas and coa l plants can break down in the heat, and older coal plants are particularly vulnerable. In addit ion, extreme heat drives high demand, meaning that t he fossil fleet is most likely to break down at times when it is most needed.

The breakdowns at coa l and gas plants in 2018 were not only at old coal power plant s, but also at the newest gas plants and supercritical coal plants.

There were 74 breakdowns at black coal power plants in New South Wa les and Queensland and 44 at Victoria's brown coal plants. There were more black coal breakdowns overall, but more breakdowns at brown coal plants relat ive to capacity. There were also 17 breakdowns at gas plants.

Figure 1: Overall breakdowns (2018)

80 70 60 V') C 50 3: .g 40 ~ n, ~ 30 a:> 20 10 0 Black coal Brown coal •Gas • Subcritical black • Supercritical black 1i..Australia Institute ..... ,,... ~

Meltdown 2018 1 Figure 2: Breakdowns per GW of capacity {2018)

10.0 9.4

9.0

8.0 > ·...u 11) 7.0 a. 11) u $ 6.0 (.!) ..... Q) a. 5.0 4.4

"'C 4.0 3: 4.0 0 ~ 11) 3.0 .....Q) a:> 2.0 1.4

1.0

0.0 Subcritical black Supercritical black Subcritical brown Gas

11>1Australia Institute ...... h.l '°""""'

Table 1: Breakdowns by fossil fuel type, share of capacity

Group Capacity Share B'down Share B'downs/G (GW) NEM s b'downs w Black coal 18.3 36% 74 55% 4.0 Brown 4.7 9% 44 33% 9.4 coal Gas 12.0 24% 17 13% 1.4 Total 35.0 69% 135 100% 3.9 Note: The remaining capacity in the NEM is mostly from renewables.

Meltdown 2018 2

Introduction

The Australia Institute founded Gas & Coal Watch in December 2017 to monitor the National Energy Market's fossil fuel power plants for breakdowns, particularly over the summer when generating units are vulnerable.

This report summarises the results from Gas & Coal Watch’s first year of operations. It identifies 135 breakdowns, of which the vast majority were unit trips. In a unit trip, one of a power plant's units is suddenly, typically unexpectedly, taken off the grid. 10 breakdowns were in the form of sharp, sudden decreases in electricity output that did not involve a unit being taken totally offline.

Thermal electricity generation is particularly affected by the heat because its efficiency depends on temperature extremes between input and output. Closed-system generators typically use water for cooling, and during periods of extreme heat power stations can fail if the water from the cooling tower is too warm, if access to water is limited, or if the discharged water being pumped out of the cooling tower is too hot.1 65 per cent of generating capacity in the NEM depends on water for cooling coal and gas fired power stations.2 Air-cooled plants are less efficient overall, and also lose efficiency in the heat.

As global warming results in more hot days, this vulnerability exacerbates. This is compounded by increased demand for electricity on hot days.

1 Union of Concerned Scientists (2011) Energy and Water in a Warming World: Freshwater Use by US power plants, http://www.ucsusa.org/clean_energy/our-energy-choices/energy-and-wateruse/freshwater-use-by-us-power-plants.html#.WfEcCohx3IU 2 Smart and Aspinall (2009) Water and the electricity generation industry, Australian Water Commission

Meltdown 2018 3 Overall breakdowns

In t he NEM, brown coal plants are found only in Victoria, while black coal plants are found only in Queensland and NSW. NSW, Victoria, Queensland and South Australia all have at least one gas plant that broke down in 2018. Tasmania has gas plant s, but they did not break down.

In absolute terms, black coal was t he worst performer, wit h 74 breakdowns to brown coal's 44 and gas' 17.

Figure 3: Overall breakdowns (2018)

80 70 60

"'C 50 3: .g 40 ~ n, ~ 30 a:> 20 10 0 Black coal Brown coal •Gas • Subcritical black • Supercritical black n.,Australia Institute ..... ,, ......

Absolute figures can be misleading, because there are more black coal plants t han brown coal plants. Black coa l is the single largest cont ributor to electricity in t he NEM, responsible for 36% of capacity.

Taking capacity into account, brown coal is t he worst performer with 9.4 breakdowns per GW capacity. Gas is the best at 1.4 breakdowns per GW capacity.

Meltdown 2018 4 Figure 4: Breakdowns per GW of capacity {2018)

10.0 9.4

9.0

.....> 8.0 ·u ro c.. 7.0 ro u $ 6.0 l9 ..... QJ c.. 5.0 4.4 V, 4.0 C ~ 4.0 0 "C ~ro 3.0 ~ a) 2.0 1.4 1.0

0.0 Subcritical black Supercritical Subcritical brown Gas black "~Australia Institute ...... ,......

Table 2 shows t he full details of breakdowns by fossi l fuel group and share of capacity.

Table 2: Breakdowns by fossil fuel type, share of capacity

Group Capacity Share B'down Share B'downs/G (GW) NEM s b'downs w Black coal 18.3 36% 74 55% 4.0 Brown 4.7 9% 44 33% 9.4 coal Gas 12.0 24% 17 13% 1.4 Total 35.0 69% 135 100% 3.9 '"'Australia Institute -... ,.. .-.

Note: The remaining capacity in the NEM is mostly from renewables.

Meltdown 2018 5 Coal

Australia's 16 coal plants are responsible for 46% of t he NEM's capacity, or 23 GW. Gas & Coal Watch further categorises plants by whether they burn brown coal (a lower efficiency, more pollut ing form of coal) or black coal. Black coal generation is almost four t imes larger t han brown coal generat ion, w ith 18.3 GW of capacity to brown coa l's 4.7GW.

Our analysis also dist inguishes bet ween "supercrit ica l" black coa l plant s and "subcrit ical" black coal plant s. A supercrit ical plant keeps water at high pressures and temperatures for greater efficiency. Aust ra lia's supercritical plants are newer than all subcritical plants in Aust ralia. All of Aust ralia's brown coal plants are subcritical.

Brown coa l plants are the worst performers overall, w it h 14.7 breakdowns per plant, followed by subcritical black coal plant s (6.8 breakdowns per plant) and then supercritical black coal plant s (3.3 breakdowns per plant).

Table 3: Breakdowns at coal stations by group

Group Plants Breakdowns Share of Share of coal Breakdowns coal breakdowns per plant stations Subcritical black 9 61 56% 52% 6.8 I Supercritical black 4 13 25% 11% 3.3 Brown coal 3 44 19% 37% 14.7 Total 16 118 7.4 ""Australia Institute ...... ,,.. --..

Meltdown 2018 6 Figure 5: Breakdowns per coal plant

16.0 14.7 14.0 12.0 10.0 8.0 6.8 6.0 4.0 3.3 2.0 0.0 Subcritical black coal Supercritical black Brown coal coal coal

1h,Australia Institute -...... _

The number and type of coal plant in each state result in different rates and severit ies of breakdowns. Victoria's three coal plants are just 19% of all coal plants in the NEM, but experienced 37% of coal breakdowns (14.7 breakdowns per plant). Queensland experienced more breakdowns per coal plant, at 6.3 per plant in 2018, than NSW did, at 4.8 per plant .

Table 4: Breakdowns at coal stations by state

State Stations Breakdowns Share of coal Share of coal B'downs stations breakdowns per plant NSW 5 24 31% 20% 4.8 I Queensland 8 so 50% 42% 6.3 Victoria 3 44 19% 37% 14.7 Total 16 118 7.4

1h,Australia Institute -...... Table 5 shows breakdowns at each coal power stat ion during 2018. Every coal plant experienced at least one breakdown. Loy Yang A and Yallourn W experiencing the most breakdowns of all plants in t he NEM, at 22 and 18 breakdowns respect ively.

Table 5: Coal power station breakdowns in 2018

Name State Group Breakdowns Breakdowns perGW Bayswater NSW Subcritical black 3 1.1 Eraring NSW Subcritical black 4 1.4 Liddell NSW Subcritical black 11 5.5 Mt Piper NSW Subcritical black 1 0.8

Meltdown 2018 7

Vales Point NSW Subcritical black 5 3.8 Callide A and B Queensland Subcritical black 5 7.1 Callide Power Plant Queensland Supercritical black 3 3.6 Gladstone Queensland Subcritical black 14 8.3 Kogan Creek Queensland Supercritical black 6 8.1 Millmerran Queensland Supercritical black 2 2.3 Stanwell Queensland Subcritical black 12 8.2 Tarong Queensland Subcritical black 6 4.3 Tarong North Queensland Supercritical black 2 4.4 Loy Yang A Victoria Subcritical brown 22 10.1 Loy Yang B Victoria Subcritical brown 4 4.0 Yallourn W Victoria Subcritical brown 18 12.4 Total 118

BLACK COAL

Thirteen black coal plants, all in Queensland or NSW, contribute 18.3 GW to the NEM, 36% of its total generation capacity.3

In 2018, each of these plants experienced at least one breakdown – and collectively, they experienced 74 breakdowns, making this group the single largest source of breakdowns.

Two of the oldest and largest plants, Liddell in New South Wales and Gladstone in Queensland, had frequent breakdowns, with 11 and 14 breakdowns respectively. However, the relatively new (commissioned in 1993) coal plant Stanwell had more breakdowns than Liddell, with 12.

Supercritical black coal

Despite being much newer and somewhat more efficient than the subcritical plants, supercritical plants did not perform better than subcritical plants overall.

Australia has four supercritical coal plants, all in Queensland:

 Kogan Creek  Callide C (also known as “Callide Power Plant”)  Tarong North

3 AEMO (2018) Generation Information Page, https://www.aemo.com.au/Electricity/National-Electricity- Market-NEM/Planning-and-forecasting/Generation-information

Meltdown 2018 8 • M illmerran

These plants are described as High Efficiency, Low Emissions (HELE) plants because they are typically more efficient than subcrit ica l coal plants. However, they are less efficient and have worse emissions t han compet ing power generat ion like gas and renewables.

Supercritical plants, the newest black coal power plants in t he NEM, broke down more often t han subcritical black coa l plant s. Supercrit ica l black coal plants represent 16% of total black coal generat ion and experienced 18% of t otal black coal breakdowns.

The nine worst unit t rips, in terms of lost capacity, were all at black coal power plants. The supercrit ical Kogan Creek plant was responsible for the t hree largest losses of capacity in t he NEM, as its single unit can generate up to 750 MW.

Table 6: Greatest losses of capacity from unit trips (2018)

Station Unit Category State Date MW lost Kogan Creek KPP 1 Supercritica l black Queensland 16/ 06/ 2018 752 Kogan Creek KPP 1 Supercritica l black Queensland 18/ 04/ 2018 750 Kogan Creek KPP 1 Supercritica l black Queensland 5/ 06/ 2018 750 Eraring ER03 Subcritical black NSW 13/ 07/ 2018 698 Bayswater BW04 Subcritical black NSW 8/ 02/ 2018 657 Eraring ER02 Subcritical black NSW 25/ 12/ 2018 657 Vales Point VP6 Subcritical black NSW 7/ 06/ 2018 631 Bayswater BW02 Subcritical black NSW 19/ 07/ 2018 626 Mt Piper MP2 Subcritical black NSW 24/ 10/ 2018 583 Loy Yang A LYA3 Subcritical brown Victoria 22/ 06/ 2018 562 Loy Yang A LYA3 Subcritical brown Victoria 4/ 11/ 2018 562 ----- '"'Australia Institute -.... ,.. ~ Note: Actual generation can somewhat exceed nameplate capacity, which is why Kogan Creek lost 752 MW on the 16th of June when its nameplate capacity is just 750 MW.

Note: Two unit trips at Loy Yang A are tied for 10m place.

BROWN COAL

Three brown coal plants, all in Victoria, contribute 4.7 GW to the NEM, 9% of its total generat ion capacity.4

4 AEMO (2018) Generation Information Page, ht t ps://www.aemo.com.au/Electricity/National-Electricity M arket-NEM/Planning-and-forecasting/Generation-information

Meltdown 2018 9

During 2018, the three plants experienced 44 breakdowns, making these plants the group with the highest rate of breakdowns.

Older plants were more susceptible to breakdowns, with the older Yallourn W (commissioned in 1975) and Loy Yang A (commissioned in 1984) experiencing 18 and 22 breakdowns respectively in 2018. The younger Loy Yang B (commissioned in 1993) had four breakdowns.

These vulnerabilities will be an increasing liability for the NEM as these antiquated plants continue to age while extreme heat events continue to increase in frequency, intensity and duration as a result of global warming.

AGE

The National Electricity Market’s coal fleet was commissioned between 1971 (Liddell) and 2007 (Kogan Creek). There are large fluctuations in breakdowns, with some of the older stations having fewer breakdowns than the newer plants.

Out of the three brown coal plants, the newest (Loy Yang B) performs best and the oldest (Loy Yang A) performs worst.

Age has no apparent effect on how often black coal plants break down. Newer black coal plants break down as often, or even a little more often, than older black coal plants. The linear trend for black coal in Table 7 displays this phenomenon, rising from 4.57 breakdowns per GW to 4.67. The most recently commissioned coal plant – Kogan Creek – is the third most unreliable black coal plant in the market.

Meltdown 2018 10 Table 7: Coal plants by age and rate of breakdowns

14.0

12.0 •

> ~ 10.0 11) • a. 11) u S 8.0 (.!) • ..... • • Q) a. • "'~ 6.0 0 "'O ~ • 11) ...... Q) 4.0 a:> • • • 2.0 • • • 0.0 • 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

• Black • Brown ...... Linear (Black) ""Australia Institute ...... ,... ._

Note: Some power plants had units commissioned at different times. In that case, the earliest commissioning date is used.

Meltdown 2018 11 Gas

About 40 gas plants in NSW, Victoria, Queensland, SA and Tasmania contribute 12.0 GW to the NEM, 24% of it s total generation capacity.5

In 2018, six plants experienced 17 breakdowns, making this group the plants with the lowest rate of breakdow ns by plant and by capacity.

There are three main types of gas power plants in Australia: steam cycle, Open Cycle gas Turbines (OCGT) and Combined Cycle Gas Turbines (CCGT). CCGT plants combine gas t urbines wit h steam technology so t hey can be used for bulk elect ricity supply as well as dispatchable energy.

Gas breakdowns did not discriminate by technology type or age, with breakdowns at both t he newest CCGT power plants (Tallawarra, Swanbank and Pelican Point) and at one of t he oldest steam cycl e plants (Newport in Victoria).

Described as "state-of-the-art" wit h "fast-start capability" , the Tallawarra plant was only commissioned in 2009.6 As well as failing t hree times in 2018, it fai led in Summer 2016- 17 with dramatic consequences outlined in our report Can 't stand the heat.7

Table 8: Gas power station breakdowns (2018)

Name State Group Breakdowns Breakdowns per GW capacity Braemar Queensland OCGT 3 6.0 Newport Power St ation Victoria Gas other 4 7.8 Oakey Queensland OCGT 1 3.5 Pelican Point SA CCGT 4 8.4 Swanbank Queensland CCGT 2 5.2 Tallawarra NSW CCGT 3 7.1 Total 17 N/A Note: This table only shows gas stations that had breakdowns. There are ""Australia Institute about 40 gas stations in the NEM, depending on classification. -... ,......

5 AEMO (2018) Generation Information Page, https://www.aemo.corn.au/Electricity/National-Electricity Market-NEM/Planning-and- 6 Energy Australia (n.d.) Ta/lawarra Power Station, https://www.energyaustralia.corn.au/about us/energy-generation/tallawarra-power-station 7 Ogge (2017) Can't stand the heat, http://www.tai.org.au/content/coal-and-gas-reliability-liability-heat report

Meltdown 2018 12

Conclusion

Older brown coal power stations are particularly vulnerable to breakdowns, but the newer supercritical power stations (so-called High Efficiency, Low Emissions plants) were more likely to experience breakdowns than other black coal plants. Two of Australia’s newer gas plants also experienced an unusually high rate of breakdowns.

If Australia is to have reliable electricity generation, unreliable gas and coal plants should be phased out in favour of renewable energy and storage.

Meltdown 2018 13

Breaking brown Gas and coal plant breakdowns in Victoria

Victoria’s brown coal fired power stations suffer from frequent breakdowns and Loy Yang A is responsible for the largest number of breakdowns on the National Energy Market, since monitoring began in December 2017, and Loy Yang A’s Unit 2 is the most unreliable unit on the grid.

Discussion paper

Bill Browne Mark Ogge

June 2019

Breaking brown 1 ABOUT THE AUSTRALIA INSTITUTE The Australia Institute is an independent public policy think tank based in Canberra. It is funded by donations from philanthropic trusts and individuals and commissioned research. We barrack for ideas, not political parties or candidates. Since its launch in 1994, the Institute has carried out highly influential research on a broad range of economic, social and environmental issues.

OUR PHILOSOPHY As we begin the 21st century, new dilemmas confront our society and our planet. Unprecedented levels of consumption co-exist with extreme poverty. Through new technology we are more connected than we have ever been, yet civic engagement is declining. Environmental neglect continues despite heightened ecological awareness. A better balance is urgently needed.

OUR PURPOSE – ‘RESEARCH THAT MATTERS’ The Institute publishes research that contributes to a more just, sustainable and peaceful society. Our goal is to gather, interpret and communicate evidence in order to both diagnose the problems we face and propose new solutions to tackle them.

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Breaking brown 2 Introduction

The Australia Institute founded Gas & Coal Watch in December 2017 to monitor the National Energy Market's fossil fuel power plants for breakdowns, particularly during high heat when generating units are vulnerable. Victoria remains highly reliant on its three brown coal fired power stations for its electricity. Victoria is responsible for around 20% of the National Electricity Market’s gas and coal capacity, but 35% of its gas and coal breakdowns. That is largely due to its three brown coal plants, particularly Loy Yang A and Yallourn W.

Victorian coal is responsible for around 13% of the National Electricity Market’s gas and coal capacity but 32% of its gas and coal breakdowns. All three of Victoria’s coal plants burn brown coal using “subcritical” technology. Coal plants in other states burn black coal only, using either subcritical or “supercritical” technology.

This special report summarises the breakdowns at Victoria’s brown coal power stations and compares them to rest of the NEM. It is released in response to the recent long-term breakdown of Unit 2 at Loy Yang A.1

1 AGL (June 2019) FY20 impact of extended unit outage at Loy Yang, https://www.agl.com.au/about- agl/media-centre/asx-and-media-releases/2019/june/fy20-impact-of-extended-unit-outage-at-loy-yang

Breaking brown 3 Breakdowns

Since Gas & Coal Watch began in mid-December 2017, there have been 185 breakdowns at gas and coal plants. 64 were at Victorian gas and coal plants:

 29 at Loy Yang A (brown coal)  26 at Yallourn W (brown coal)  5 at Loy Yang B (brown coal)  4 at Newport Power Station (gas) That makes Loy Yang A and Yallourn W the least reliable coal plants in the National Electricity Market (NEM), by number of breakdowns.

Figure 1: Breakdowns by power plant (Victorian plants in orange)

Note: Figures as of 17 June 2019.

Breaking brown 4 Breakdowns per GW

We also measure breakdowns by Gigawatt of capacity, to reflect that some plants are much larger than others.

 Yallourn W had 17.9 breakdowns per GW  Loy Yang A had 13.1 breakdowns per GW  Loy Yang B had 5.0 breakdowns per GW  Newport Power Station had 7.8 breakdowns per GW That makes Yallourn W the least reliable coal plant by breakdowns per GW. Loy Yang A is the second least reliable coal plant, and the third least reliable gas or coal plant. Newport Power Station is the fourth least reliable gas plant.

Figure 2: Breakdowns per GW (Victorian plants in orange)

Note: Figures as of 17 June 2019.

Breaking brown 5 Individual units

As reported, Unit 2 at Loy Yang A is out of operation foll owing an 18 May 2019 unit t rip and is expected to remain so for seven mont hs.

The precipitat ing unit t rip appears in Gas & Coal Watch (supplied by OpenNEM):

Loy Yang A 18May2019 Unit

2000 - LYA4 - LYA3 - LYA2 - LYAl

1500 I ~ ;° 1000 0

500

18- May '""Australia Institute 1,1...,..., ~t..cmcl<"'I,

Unit 2 is the worst performing unit in the National Electricity Market, with 10 breakdowns recorded by Gas & Coal Watch. Victorian coal units are five of the t op 10 worst performing unit s (by number of breakdowns).

Unit name Type State Breakdowns Loy Yang A Unit 2 Brown coal Victoria 10 Kogan Creek (only unit) Supercrit ica l black coal Queensland 9 Loy Yang A Unit 1 Brown coal Victoria 9 Yallourn W Unit 3 Brown coal Vict oria 9 St anwell Unit 4 Subcritical black coal Queensland 8 Yallourn W Unit 1 Brown coal Victoria 8 Liddell Unit 2 Subcrit ical black coal NSW 7 Yallourn W Unit 2 Brown coal Vict oria 7 Tallawarra Unit 1 Gas (CCG T) NSW 7 Callide B Unit 1 Subcrit ical black coal Queensland 6 '""Australia Institute 1,1...,..., ~t..cmcl<"'I,

Breaking brown 6 Summer out (2019)

On the 25th of January 2019, the two most unreliable power stations in the country were not operating at capacity. According to the Victorian Minister for Energy Lily D’Ambrosio, three units at Loy Yang A and Yallourn W were not working.

As temperatures soared to 44 degrees, Minister D’Ambrosio admitted:

This means we can’t rule out brownouts … We have ageing coal-fired power stations. They are becoming less reliable.2

The units were brought offline following tube leaks or because of scheduled maintenance. These examples were not included in the tally of breakdowns given there was some notice given, however their being offline did feed into the unreliability already experienced by these two power stations, which will only increase with the rise in extreme heat.

As climate change results in more hot days, this vulnerability exacerbates. This is compounded by increased demand for electricity on hot days.

On the 25th of January, large scale solar farms were running at 93 per cent of their maximum output, which is in stark contrast to Victoria’s brown coal generators, where 1,600 MW of generation was offline.4

2 Chang (January 2019) Power outage in Melbourne as electricity generators fail and Victorians brace for hottest day since Black Saturday https://www.news.com.au/technology/environment/power-stations-fail-as- victorians-brace-for-hottest-day-since-black-saturday/news-story/b404770015b841f39e348b19e5eec3a7 3 Union of Concerned Scientists (2011) Energy and Water in a Warming World: Freshwater Use by US power plants http://www.ucsusa.org/clean_energy/our-energy-choices/energy-and-wateruse/freshwater-use-by- us-power-plants.html#.WfEcCohx3IU 4 Saddler (February 2019) NEEA January http://www.tai.org.au/sites/default/files/NEEA%20Electricity%20Update%20Feb%202019%20%5BWEB%5D_ 0.pdf

Breaking brown 7 With no more generation available, all interconnectors flowing at capacity and all contracted reserves used up, the Australian Energy Market Operator was forced to directly load shed (i.e. forced blackouts).5

To some extent, the events of January 2019 were foreseeable, unlike those of the previous summer.

5 AEMO (April 2019) Load Shedding in Victoria 24 and 25 January 2019 https://www.aemo.com.au/- /media/Files/Electricity/NEM/Market_Notices_and_Events/Power_System_Incident_Reports/2019/Load- Shedding-in-VIC-on-24-and-25-January-2019.pdf

Breaking brown 8 Bad timing (2018)

Victoria's gas and coal breakdowns in January 2018 coincided with some of Victoria's periods of highest demand - and highest electricity prices.

The following graphs show Victoria's demand for electricity (in MW) and the spot price of electricity (in MW h) for January 2018.

Figure 3: Victorian electricity demand and prices, January 2018

10,000 $14,000

9,000 $12,000 8,000

7,000 $10,000

'O 6,000 .i::. C $8,000 E"' ~ Q) 5,000 ~ 'O li; ~ I $6,000 Q. ~ 4,000 ~

3,000 $4,000

2,000 $2,000 1,000 ..,.... - $-

Victorian demand - Spot price (RHS) 1.,..,Australia Institute ...... ,,.., ..,,......

Source: Australian Energy Market Operator (2019) Data Dashboard, https://aemo.com.au/Electricity/National-Electricity-Market-NEM/Data-dashboard

Note: The darker colours indicate times when there was a gas or coa l breakdown.

January 2018 was a particularly bad period for Victorian brown coa l. There were 12 breakdowns in the 16 days between the Gth and 21st of January. Summer is a period of high demand for t he Nat ional Elect ricity Market, and two of these breakdowns coincided with periods of particularly high state electricity demand. In other words, the breakdowns came at the worst possible t ime for t he grid. In one of these incidents, the breakdown coincided with large price increases.

Breaking brown 9 At 4:30pm on t he 6th of January, Loy Yang A lost 264 MW, and did not recover for several hours. This came during t he highest demand for the first half of January, and the sevent h highest demand in t he summer months of 2018.

At 3:30pm on the 18th of January, Loy Yang B lost 528 MW, and did not recover until 6:00pm. This was during t he second highest demand in January. During this period, prices reached their highest point for the summer months of 2018, going to $12,931 per MW h. This is 97 times higher than the average price in January, of $134.

This price speak was reported by Fairfax at the t ime,6 and energy analysts subsequently warned t hat t hese problems would become more likely as the plants get older.7

In February and December 2018, gas and coal breakdowns did not coincide wit h any particular demand or price peaks, as shown in Figure 4 and Figure 5.

Figure 4: Victorian electricity demand and prices, February 2018

10,000 $8,000

9,000 $7,000 8,000 $6,000 7,000 $5,000 -0 ..c. C 6,000 E"' $4,000 ~ Q) 5,000 ~ -0 ~ $3,000 c. ~ 4,000 ~

2,000 $1,000

1,000 $-

-$1,000

Victorian demand - spot price (RHS) ""Australia Institute ...... ", ... ~

6 Latimer (2018} Loy Yang 8 failure sends prices soaring, triggers supply safeguards, https://www. sm h .corn.au/business/the-economy/ loy-ya ng-b-fa ii ure-sends-prices-soa ring-t riggers-supply safegua rds-20180119-p4yym r. htm I 7 Latimer (2018} Victorian coal power station failures put NEM reliability at risk, https://www. can berratim es.com .a u/busi ness/the-eco nomy/victo ria n-coal-power-station-fa ii u res-put-nem rel ia bi I ity-at -risk-20180409-p4z819. htm I

Breaking brown 10 'TI oq' co MW demand ....C: .... (1) (1) ..... N w -I> V, -.J IO V> SI' !1' u, 111 z 0 0 0 0 0 0 0 0 0 ~ 0 0 ::, ... ..,C: 8 8 8 8 8 8 8 8 8 < Otl !'! n -t !'! C" :,- 1/12/2018 a: .... Cl) )> 0 0 C: 2/12/2018 .... a. V, iii' ~ ..,OJ ... 3/12/2018 ::, ol ::, ""..,Cl) .;;· 4/12/2018 (1) n :, 5/12/2018 ii' 0 m n 0 :, 6/12/2018 ...... ,C: Cl) ;:;· V, cia 7/12/2018 -< ;::;: :, ~ 8/12/2018 < a. s.'. OJ c.. ;:;· .., 9/12/2018 (1) OJ ... Cl) < Cl) ..."" ~- 10/12/2018 3 ... 0 0 11/12/2018 ::, ~:j" "O :i. "' 0) c.. Cl) ::, 12/12/2018 V, ~ 111 OJ 0.. ::, :i: ... (1) 14/12/2018 :,- ..,0 3 c.. Cl) 0) 15/12/2018 :, ,;:, ::, "O ... 0 0.. 16/12/2018 .... :,- .... ;:;· Cl) .!:£ 17/12/2018 (1) ,.Ill ro i::::, 18/12/2018 :i: Cl 0 OJ (1) V, s 19/12/2018 V,I n OJ i::::, "C (1) Cl 20/12/2018 OQ V, OJ s V, ::r- 21/12/2018 3 0- -g C" 0 n" 22/12/2018 (1) ~ Cl (1) n ...... 0 ,Cl. ;o 23/12/2018 N :::c: 0 !!!.. V, 24/12/2018 c:r ...... , - 00 Cl) 25/12/2018 OJ ~ ~ 27/12/2018 ""a. 0 28/12/2018 :i: ? 29/12/2018 30/12/2018 31/12/2018

V> V> V> V> V> V, Y' V, ...... N N V, V, 8 8 0 0 80 0 80 0 $ per MW h ...... -- - Conclusion

As climate change worsens, there will be more heatwaves, putting more pressure on Victoria’s brown coal power generation.

The solution to the energy trilemma of reliability, price and pollution is more renewable energy and storage. Renewables bring down the peak demand during summer, are the cheapest new energy and are emissions-free.

Breaking brown 12

Money for nothing

Despite over a billion dollars of Australian government spending on CCS initiatives since 2003, there are still no large-scale coal with CCS operations in Australia. Directing CEFC funds into coal with CCS is a uniquely poor policy proposal.

Discussion paper

Bill Browne Tom Swann May 2017

Photograph by Tom Morris, from Wikimedia Commons, used under the terms of the Creative Commons Attribution-ShareAlike licence.

ABOUT THE AUSTRALIA INSTITUTE

The Australia Institute is an independent public policy think tank based in Canberra. It is funded by donations from philanthropic trusts and individuals and commissioned research. Since its launch in 1994, the Institute has carried out highly influential research on a broad range of economic, social and environmental issues.

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Summary

In 2007, then-Environment Minister Malcolm Turnbull announced a $100 million grant for a proposed coal plant at Loy Yang “suitable for” CCS. Turnbull said “Projects like this one … will play an integral role in helping to reduce emissions in Australia”.1 Five years later, the grant was withdrawn. The operator has been liquidated.

In February 2017, Prime Minister Malcolm Turnbull put CCS back on the agenda. He argued as the world’s largest coal exporter, Australia has a “vested interest” in promoting clean coal, and lamented that despite substantial public investment over the years “we do not have one modern high-efficiency low-emissions coal-fired power station, let alone one with carbon capture and storage”.2

In 2009, the head of the Australian Coal Association promised that that we will “have commercial scale demonstration plants with carbon capture and storage in operation in Australia by 2015”.3 In 2017 the chief national coal lobbyist said it is “pretty early days” with regards to CCS, which is “an evolving technology”.4

Despite the poor track record of coal with CCS, the Turnbull government is now proposing to fund it through the Clean Energy Finance Corporation, which has previously focused on commercial or near-commercial projects, mostly renewables.

In light of Turnbull’s proposal, this report outlines previous funding to CCS and how little Australia has to show for it.

Since 2003, successive Australian governments have backed their promises that CCS will preserve the coal industry with promises of public money. Over $3.5 billion has been committed towards a wide range of CCS-related projects, initiatives and programs. Over $1.3 billion was identified as actually distributed.

The government found it difficult to find projects to fund, and funded projects often failed. While funding was sometimes ‘clawed back’, other times this was not possible. ZeroGen, a proposed coal plant with CCS, went into administration despite at least

1 Macfarlane and Turnbull (2007) Additional $100 million boost to clean coal, https://www.environment.gov.au/minister/archive/env/2007/pubs/mr12mar07.pdf 2 Turnbull (2017) Address at the National Press Club and Q&A, http://malcolmturnbull.com.au/media/address-at-the-national-press-club-and-qa-canberra 3 Jones (2009) Ralph Hillman and Richard Denniss join Lateline, http://www.abc.net.au/lateline/content/2008/s2575402.htm 4 Sky News (2017) PM Agenda, https://twitter.com/SkyNewsAust/status/833553271503466496

Money for nothing 1

$187 million in subsidies. The 99% Australia-funded Global CCS Institute backed more overseas projects than Australian ones and had extravagant operational spending.

The coal industry also announced a $1 billion CCS industry fund, which they said would match federal government spending. The fund has collected and committed only $300 million (mostly for CCS projects), and some of this fund has been spent on election campaign promotion of “clean coal”. Contributions to the fund were deducted against royalties in some states, meaning the fund was subsidised by the taxpayer.

Controversies and poor progress led to government funding for CCS being repeatedly cut. Conservative politicians showed scepticism. In 2009, then-Resources Minister Ian MacFarlane said:

The reality is, you are not going to see another coal fired power station built in Australia. … You can talk about all the stuff you like about carbon capture storage, that concept will not materialise for 20 years, and probably never.5

Despite the promises and spending, there has never been an operational large-scale deployment of coal with CCS in Australia. Attempts to develop coal with CCS, such as the ZeroGen project, have been expensive failures.

Australia’s only close-to-operational CCS project is connected to gas extraction. Apart from three carbon storage projects, not expected to be operational until the 2020s, there are no other large-scale CCS projects at any stage of development.6

Australia has only ever had two small ‘operational’ carbon capture projects at coal- fired power plants. Callide-A, a demonstration operated by CS Energy and heavily subsidised by government and industry, successfully captured small volumes of CO2 but there was no place to store the carbon once it was captured. A pilot plant at the Hazelwood brown coal plant captured an even smaller amount.

Asked about the Callide-A project in 2017, CS Energy CEO Martin Moore said:

We proved that technologically it’s possible to retrofit [CCS] to existing coal- fired plants, but commercially, the numbers don’t stack up … It’s unlikely there

5 Ferguson (2009) Malcolm and the malcontents, http://www.abc.net.au/4corners/content/2009/s2737676.htm 6 Global CCS Institute (n.d.) Large scale CCS projects, https://www.globalccsinstitute.com/projects/large- scale-ccs-projects

Money for nothing 2

will be [a commercial operation for CCS in Australia], I think that technology may well be bypassed … simply because of the economics.7

This track record is all the more remarkable given Australia’s disproportionally large focus on CCS compared with other countries. From 2009 to 2015, Australia spent more of its energy RD&D budget on CCS than nearly every other country in the OECD.

CCS has also struggled internationally. There are only 16 large-scale CCS facilities operating globally and only two involve coal. Both sell their captured CO2 for enhanced oil recovery. Neither can be considered ‘near-zero emissions’.

In 2016 the International Energy Agency emphasised that if CCS is commercialised, it will then need a stable and substantial carbon price, or regulatory mandates, in order to be successful. Advocates for CCS have consistently identified a price on carbon as necessary. The first chief executive of Australia’s Global CCS Institute, Nick Otter, said:

In order to get the CCS deployed, ultimately you're going to need a carbon price. In the end, the big driver will be a good, strong carbon price.8

There are other barriers. According to CO2CRC, a CCS research group, by 2030 coal with CCS will be far more expensive than most renewables, and more expensive than gas with CCS. Investors are unlikely to choose the most expensive way to use CCS.

Moreover, coal with CCS is less flexible than solar thermal with storage and hydro- electric, further reducing its competitiveness in an increasingly variable grid.

Despite successive government’s CCS expenditure, there are few large-scale, currently- operating CCS projects worldwide, none in Australia, and no plans for large-scale coal with CCS. The company that ran Australia’s biggest carbon capture demonstration says it is unlikely it will ever be commercial. It is less flexible than other energy sources, is likely to be more expensive than about every other energy source – including gas with CCS – and it needs a carbon price, which is not being proposed.

In short, the Turnbull government’s idea to direct the CEFC to fund coal with CCS is a uniquely poor one. It would redirect funds from commercial or near-commercial clean energy towards a technology that remains virtually non-existent in Australia, despite

7 Cooper (2017) No more coal-fired power stations will be built in Australia, Queensland provider CS Energy says, http://www.abc.net.au/news/2017-02-16/coal-power-generator-says-new-plants-not- viable/8277210 8 Kirkland (2010) Can Australia afford carbon capture and storage for coal?, https://www.scientificamerican.com/article/can-australia-afford-carbon/

Money for nothing 3

substantial government support. Australians should ask: is it time to stop throwing good money after bad?

Money for nothing 4

Table of Contents Summary ...... 1 Introduction ...... 6 A long history of broken promises ...... 7 Federal spending on CCS ...... 10 Industry spending on CCS ...... 14 Australia has spent disproportionately large amounts on CCS ...... 16 Projects in Australia ...... 17 ZeroGen (zero results) ...... 19 Callide-A ...... 19 Surat Basin Integrated CCS project...... 21 CarbonNet Project ...... 21 South West Hub Project ...... 22 Otway research facility ...... 23 Projects internationally ...... 24 Boundary Dam ...... 25 Petra Nova ...... 25 Kemper County ...... 25 Commercialisation ...... 27 Price and reliability ...... 27 Need for a carbon price ...... 28 Conclusion ...... 30

Money for nothing 5

Introduction

Over the past two decades, successive federal and state Australian governments from both major parties have held up carbon capture and storage (CCS) as the future for the coal industry in a world that is tackling climate change. In CCS, carbon dioxide (CO2) emissions from an industrial source, such as a power plant, are captured and stored indefinitely, typically underground.

Government promises about CCS have been backed with substantial government funding. The coal industry has been similarly enthusiastic, although it has provided a much smaller share of the funding. Despite the promises and the large amount of money spent, CCS is still far from commercial viability and uptake. There are very few large-scale CCS projects in operation worldwide (capturing hundreds of thousands or millions of tonnes of CO2 per annum),9 fewer still are capturing emissions from coal- fired power plants, and none of these are in Australia.10

The Turnbull government is now proposing support for CCS and other coal technologies via the Clean Energy Finance Corporation (CEFC). This government-owned corporation invests in renewables and other clean energy projects.

This paper enumerates federal government and industry spending on CCS since 2003, especially coal with CCS, and puts it in the context of spending from comparable countries. It compares this spending against the record of CCS projects in Australia and worldwide. The poor track record for CCS projects provides little support for the government’s proposal to divert money from commercially-viable renewables towards coal with CCS. Despite two decades of promises, there are few CCS projects in operation and the technology remains very expensive. By contrast, renewables are booming and costs are falling rapidly.

9 The Global CCS Institute’s current threshold for “large-scale” is 400,000 tonnes per annum, or 800,000 tonnes per annum for a coal plant, although at one point it used a one million tonnes per annum threshold. Global CCS Institute (n.d.) Large-scale CCS projects – definitions, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects-definitions; Global CCS Institute (n.d.) G8 objective, https://hub.globalccsinstitute.com/publications/strategic-analysis-global-status- carbon-capture-storage-report-5/12-g8-objective 10 Global CCS Institute (n.d.) Large scale CCS projects

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A long history of broken promises

The term ‘clean coal’ was first used to market the relatively low impurities of some of Australia’s coal, in the context of concerns about local health impacts from burning coal. The term was soon used to refer to CCS, in the context of climate change.

In a 1998 speech to the Australian Coal Association, Resources and Energy Minister Warwick Parer highlighted “new advanced clean coal technologies” other than increasing efficiency, and warned that failure to deploy these technologies “could effectively exclude coal as a viable energy source post 2010” as the world started to tackle climate change.11 Ministers subsequently turned this warning around, arguing that unless CCS could be made to work, the world would not successfully tackle climate change.

In 2003, the Howard government founded the CO2 Cooperative Research Centre (CO2CRC), a university-based initiative working on CCS. The next year, it set up the $500 million Low Emission Technology Demonstration Fund (LETDF) to encourage industry to reduce greenhouse gas emissions.

In 2007, then-Environment Minister Malcolm Turnbull announced the LETDF’s final grant: $100 million to HRL Ltd’s coal gasification plant at Loy Yang, which would be “suitable for” CCS. Turnbull said “Projects like this one … will play an integral role in helping to reduce emissions in Australia”.12 Five years later, the grant was withdrawn. HRL Ltd and its associated entities have since been liquidated.13

Kevin Rudd’s victory in the 2007 election resulted in a boom for CCS spending, with billions of dollars committed through various bodies. These included the CCS Flagships program and the National Low Emission Coal Initiative, both intended to support industry and research projects. The Global CCS Institute was to attract international funding and find global solutions for CCS, but has achieved neither.

11 Cited in Pierce, McKnight, Burton (2013) Big Coal, p158 12 Macfarlane and Turnbull (2007) Additional $100 million boost to clean coal, https://www.environment.gov.au/minister/archive/env/2007/pubs/mr12mar07.pdf 13 Environment Victoria (n.d.) How the community stopped a coal-fired power station, http://environmentvictoria.org.au/how-the-community-stopped-a-coal-fired-power-station-a- timeline/; ASIC (2016) Notice of deemed special resolution to wind up a company, https://insolvencynotices.asic.gov.au/browsesearch-notices/notice-details/Dual-Gas-Pty-Ltd- 117102244/5cfbb2fa-db25-4f99-af4d-5706356c3502

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Rudd’s enthusiasm for CCS was echoed by the coal industry. Ralph Hillman, head of the Australian Coal Association, announced that we will “have commercial scale demonstration plants with carbon capture and storage in operation in Australia by 2015”, a commitment that has “the whole G8 behind it”.14

Treasury Research into the carbon price in 2011 argued there could be a role for CCS, but found it would be modest. The modelling predicting that without CCS domestic emissions would be higher by about 25 million tonnes per annum in 2050.15 Australia’s emissions are currently about 550 million tonnes per annum, so CCS was projected to reduce emissions by less than 5%. Moreover, the modelling predicted that it would mostly be gas, not coal, that would have CCS deployed.

At the time, the Coalition was highly sceptical. Then-Coalition climate change spokesperson Ian Macfarlane (now head of the Queensland Resources Council), said:

The reality is, you are not going to see another coal fired power station built in Australia. That's, that's a simple fact. You can talk about all the stuff you like about carbon capture storage, that concept will not materialise for 20 years, and probably never.16

As problems mounted in the CCS programs, successive Labor budgets pared back CCS funding. The Abbott government also substantially cut CCS funding, although it introduced its own CCS initiative in 2015.17

Now the Turnbull government is showing enthusiasm for CCS not seen since the Rudd government. In February 2017, Malcolm Turnbull said that as the world’s largest coal exporter, Australia has a ‘vested interest’ in promoting clean coal. He lamented that:

We've invested $590 million since 2009 in clean coal technology research and demonstration and yet we do not have one modern high-efficiency low- emissions coal-fired power station, let alone one with carbon capture and storage.18

14 Jones (2009) Ralph Hillman and Richard Denniss join Lateline, http://www.abc.net.au/lateline/content/2008/s2575402.htm 15 Commonwealth of Australia (2011) Strong growth, low pollution, pp 113, 120 16 Ferguson (2009) Malcolm and the malcontents, http://www.abc.net.au/4corners/content/2009/s2737676.htm 17 Macfarlane (2015) New support for carbon capture and storage R&D, http://www.minister.industry.gov.au/ministers/macfarlane/media-releases/new-support-carbon- capture-and-storage-rd 18 Turnbull (2017) Address at the National Press Club and Q&A, http://malcolmturnbull.com.au/media/address-at-the-national-press-club-and-qa-canberra

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Unlike the Rudd government’s programs, which were drawn from general revenue, the Turnbull government would apparently fund CCS with money intended for renewables and energy efficiency.

Greg Evans of the Minerals Council of Australia, said in early 2017 that we are in “pretty early days” with regards to CCS, which is “an evolving technology”. Evans stressed that any proposals to build a CCS coal plant in Australia “are currently being costed” and there are “no precise figures at this stage” on how much it would cost to implement in Australia.19 Evans’ reserved comments about CCS stand in stark contrast to Hillman’s enthusiastic predictions in 2009, when he said the technology would be commercially operational by 2015.

The last eight years have been extremely unrewarding for CCS. That is despite hundreds of millions of dollars of support, big promises it, and warnings of the need to make CCS work – whether for the climate or for the coal industry.

19 Sky News (2017) PM Agenda, https://twitter.com/SkyNewsAust/status/833553271503466496

Money for nothing 9 Federal spending on CCS

The Aust ra lia government has spent substantial volumes of public funds on CCS over the last fifteen years, but has little to show for it .

The government has committed over $3.5 billion since 2003. Much of this has been either clawed back in later budgets, or returned by cancelled and failed project s. Nonetheless, since 2003 taxpayers have contributed over $1.3 billion towards CCS initiatives. These initiatives are identified in Table 1, w hich outlines commitments and identified expenditure for CCS projects.

Table 1 Federal government CCS initiatives

Initiative Scope Lifetime Federal funding Committed Distributed or to (Sm) be distributed (Sm) C02CRC ccs 2003- present $75 $7520 Low Emission Mostly CCS or CCS 2004- ? $500 ~$260- $41021 Technology compatible Demonstration Fund Asia-Pacific 25% to renewables; 2006-2011 >$0-$75 $0-$7522 Partnership on CCS' share unclear Clean Development and Climate

2° Figures incl ude $25 milli on from CCS Flagships in 2015, deducted from the overall totals to avoid double counting. Taylor (2012) Coal hard light of day for dud scheme; medianet (2015) Australian Government injects $25 million into C02 capture & storage research, http://www.medianet.com.au/releases/release-detai1s/?id=820598 21 At least two projects, wit h federa l gra nts worth a total of $150 mill ion, had their gra nts withdrawn. It is not cl ear if some o r all of the gra nt money was recovered. Pa rl iament of Australia (2005) $500m low emissions technology fund takes final shape, http://parlinfo.aph.gov.au/parl1nfo/search/display/display.w3p:guery= ld%3A%22media%2Fpressrel%2F1K8G6%22; Macfarlane and Turnbull (2007) Additional $100 million boost to clean coal; Environment Victoria (n.d.) How the community stopped a coal-fired power station: A timeline, http://environmentvictoria.org.au/how-the-community-stopped-a-coal-fired-power station-a-t imeline/; Department of Industry (2011) Low Emission Technology Demonstration Fund {LETDF) Round 1, http://www.industry.gov.au/Energy/Documents/energy- programs/REVISED LETDF Funded pro jects 30 May 2011.doc 22 Austra lia contributed $100 million, of which 25% was reserved for renewables. CCS' share is therefore some portion of $75 million. Fyfe (2006) $445m for cleaner energy, but it won't stop climate change, http://www.theage.com.au/news/national/445m-for-cleaner energy/2006/01/12/1136956302252.htm1

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National Low CCS or CCS-compatible 2008–? $500 $343–$37023 Emissions Coal Initiative Global CCS CCS 2009–present $400 $30524 Institute CCS Flagships CCS 2009–present $2,000 $271–$29925 CCS RD&D CCS 2015–2016 $25 $2426 Geoscience CCS; note that GA also 2012–2016 $61 $6127 Australia’s works on CCS using its National CO2 regular funding Infrastructure Plan Totals $3,536–$3,611 $1,341–$1,594 Notes: This is data as reported. These numbers are indicative only. The figures have not been adjusted for inflation. The totals account for $25 million paid to CO2CRC by CCS Flagships, and $27 million taken out of CCS Flagships and NLECI without indication of what share was taken from each fund.

Note this includes all CCS – not simply coal with CCS. As discussed below, coal with CCS is a small part of the CCS story.

23 $27.4 million was cut from NLECI and CCS Flagships in the 2016 budget. It is not clear what share came from each fund. Alexander (2008) $500m to set up coal emissions bodies, http://www.smh.com.au/national/500m-to-set-up-coal-emissions-bodies-20080728-3lyn.html; Australian Government (2009) Carbon Capture and Storage Flagships, http://www.budget.gov.au/2009- 10/content/glossy/infrastructure/html/infrastructure overview 30.htm; Department of Resources, Energy and Tourism (2012) National Low Emissions Coal Initiative (NLECI) [recovered from Internet Archive], https://web.archive.org/web/20120320171643/http://www.ret.gov.au/resources/resources program s/nleci/Pages/NationalLowEmissionsCoalInitiative.aspx; Australian Government (2016) Budget Part 2: Expense Measures, http://budget.gov.au/2016-17/content/bp2/html/bp2 expense-17.htm 24 Taylor (2012) Coal hard light of day for dud scheme 25 $27.4 million was cut from NLECI and CCS Flagships in the 2016 budget. It is not clear what share came from each fund. Australian Government (2009) Budget Part 2: Expense Measures; Australian Government (2010) Budget Part 2: Expense Measures (continued); Australian Government (2011) Budget Part 2: Expense Measures (continued); Australian Government (2013) Budget Part 2: Expense Measures (continued); Australian Government (2013) MYEFO Appendix A: Policy decisions taken since the 2013–14 Budget (continued); Australian Government (2014) Budget Part 2: Expense measures (continued); Australian Government (2016) Budget Part 2: Expense Measures (continued) 26 Department of Industry (n.d.) Carbon Capture and Storage Research Development & Demonstration Fund, https://industry.gov.au/resource/LowEmissionsFossilFuelTech/Pages/Carbon-Capture-and- Storage-Research-Development-Demonstration-Fund.aspx ; Canavan (2016) $23.7 million for carbon capture and storage, http://www.minister.industry.gov.au/ministers/canavan/media-releases/237- million-carbon-capture-and-storage 27 Australian Government (2011) Budget Part 2: Expense measures (continued)

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The Low Emission Technology Demonstration Fund, set up by the Howard government, committed $410 million to six projects. Four of these were CCS or CCS-related. Four of the projects were cancelled or went into administration, including two of the CCS- related projects.

The trifecta of funds established by the Rudd government – the Global CCS Institute, CCS Flagships and the National Low Emission Coal Initiative – struggled to identify and fund successful CCS projects.

CCS Flagships was announced with an initial commitment of $2.0 billion. This was cut in almost every successive budget, to under $300 million as of the 2016 budget. CCS Flagships ended up supporting only two projects: the CarbonNet Project and the South West Hub Project. Projects supported by CCS Flagships were initially expected to be operational by 2015.28 Instead, both projects now have start dates in the 2020s.

The National Low Emission Coal Initiative was allocated $500 million, of which it committed about $370 million to several coal with CCS and related coal projects. These included the:

 Wandoan project (cancelled),  a NSW coal capture project (not found),  the Hazelwood 2030 project (cancelled) and  Callide-A (successfully captured CO2 but could not store it).29

The initiative also funded a number of research programs and plans.

The Global CCS Institute was allocated $400 million, with the expectation that other countries would contribute. In practice, 99% of the institute’s funding came from the Australian government.

The fund attracted considerable controversy over its priorities. It spent $31 million on projects in other countries, including $18 million on four US and Canadian projects (all cancelled). The fund spent $54 million on “operational expenses” in its first two years

28 Department of Resources, Energy and Tourism (n.d.) CCS Flagship program: Information for applicants to support project nominations 29 The descriptions on the project’s webpage are general in nature. If they do not describe the Wandoan project and the Hazelwood 2030 project, then they describe other projects that are also not operating: Department of Industry, Innovation and Science (n.d.) National Low Emission Coal Initiative, https://industry.gov.au/resource/LowEmissionsFossilFuelTech/Pages/National-Low-Emission-Coal- Initiative.aspx ; Department of Resources, Energy and Tourism (n.d.) National Low Emissions Coal Initiative (NLECI) [recovered from Internet Archive], https://web.archive.org/web/20120320171643/http://www.ret.gov.au/resources/resources program s/nleci/Pages/NationalLowEmissionsCoalInitiative.aspx

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(2009–2010), compared with $6 million spent on Australian projects in its first four years. The institute also gave over $50 million to the Asian Development Bank, the IEA and the Clinton Foundation.30

In 2012, the institute’s second chief executive, Brad Page, said that it is “actually impossible to spend that amount of money … responsibly”.31

While the Abbott government cut substantial funding from CCS projects, in 2015 it announced a $25 million CCS Research Development and Demonstration Fund, which allocated $24 million to seven applicants in 2016.

30 Atkin (2014) Cloud hangs over Rudd’s clean coal vision; Taylor (2012) Coal hard light of day for dud scheme 31 Taylor (2012) Coal hard light of day for dud scheme

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Industry spending on CCS

In 2004, the coal industry established Coal21. This was intended to grow to a $1 billion fund for clean coal R&D, paid for by a voluntary levy on the black coal industry. The levy was deductible against royalties in some states. Individual companies have also paid for part of the CCS projects that they own and operate, but industry does not appear to collect and collate this information.

The fund was expected to match federal and state contributions. Ralph Hillman, head of the Australian Coal Association, said in 2009:

the [Commonwealth] Government's actually picking up about a third of the cost. It does it on the basis of a Commonwealth a third, the state a third and industry a third.32

This does not appear to have occurred. The federal government’s contribution to CCS exceeds a billion dollars, while Coal21 has stalled at about $300 million committed after industry’s four-year freeze on the levy.33 In addition, since the Coal21 voluntary levy is deductible against mining royalties in some states,34 it has ultimately been funded by the taxpayer in those states.

By 2014, the fund had spent $250 million and a further $46 million of grants were under assessment.35 In October 2015, when the Coal21 site was last updated, there were 13 projects with $301 million committed. Ten of these, with about $270 million of commitments, involved CCS.36

32 Jones (2009) Ralph Hillman and Richard Denniss join Lateline 33 Taylor (2014) Carbon capture and storage research budget slashed despite PM’s coal focus; Long (2017) Pre-election coal advertising funded by money meant for clean coal research, http://www.abc.net.au/news/2017-02-20/coal-advertising-funded-by-money-meant-for-clean-coal- research/8287326 34 See for example: Queensland Treasury (2015) Determination of coal royalty, https://www.treasury.qld.gov.au/taxes-royalties-grants/royalties/mra001.php 35 Taylor (2014) Carbon capture and storage research budget slashed despite PM’s coal focus 36 Minerals Council of Australia (n.d.) Coal21, http://www.minerals.org.au/resources/coal21/about coal21

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In 2013, Coal21’s mandate was quietly changed to allow the fund to also “promote the use of coal”.37 Recently it was revealed that the publicly subsidised fund was used during the 2016 election campaign to fund $2.5 million of ‘clean coal’ advertising.38

Coal21 has not delivered working commercial-scale CCS nor has it matched federal government spending, as promised by Hillman in 2009. The fund, which is at least partly funded by deductions from royalty payments, has not expanded its commitment since 2014 – but has funded advertising to promote clean coal.

37 Taylor (2014) Carbon capture and storage research budget slashed despite PM’s coal focus; Brewster (2013) 'Clean coal' money used to promote coal use, http://www.abc.net.au/lateline/content/2013/s3787338.htm 38 Long (2017) Pre-election coal advertising funded by money meant for clean coal research

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Australia has spent disproportionately on CCS

Australia’s government is not the only government to spend public money on CCS, but it has spent more than most.

Since 2007, total global CCS investment has been less than US$20 billion.39 Australia’s federal spending of over $1.3 billion represents about 5% of the world’s total expenditure on this technology. That is much higher than Australia’s share of global population (0.3%) or of GDP (1%).

The IEA reports data on government spending on energy research, development and deployment, as reported by OECD members. Australia has spent more of its energy RD&D budget on CCS than nearly every other country, putting it first or second in the OECD every year between 2009 and 2015, peaking at 44% in 2012, with an annual average of 28%. In 2015, the last reported year, this fell to 19%.

The Australian federal government was responsible for an annual average of 13% of all OECD spending over this period.

By comparison, the US is responsible for between 16% and 48% of world CCS RD&D spend in various years, but this is just 3 to 5% of the total US energy RD&D spend; they also spent substantial amounts on other technologies.40

In February 2017, IEA head Fatih Birol said that for CCS to succeed, “there is a need for a greater initiative from countries, maybe such as Australia and others”.41 In fact, Australia has already punched well above its weight – with little to show for it.

39 Macdonald-Smith (2015) Carbon capture and storage needs government support: industry, http://www.smh.com.au/business/energy/carbon-capture-and-storage-needs-government-support- industry-20151105-gkrfxa.html 40 Calculations by The Australia Institute, based on: IEA (2015) Energy Technology RD&D Statistics, http://www.oecd-ilibrary.org/energy/data/iea-energy-technology-r-d-statistics/rd-d-budget data- 00488-en 41 Ferguson (2017) IEA calls on Australia to lead world in carbon capture and storage technology, http://www.abc.net.au/news/2017-02-22/international-body-says-australia-should-be-clean-coal- leader/8294312

Money for nothing 16 Projects in Australia

There are no large-scale CCS operat ions anywhere in Au st ralia, despit e t he Aust ralian government having spent over a billion dollars on a plethora of projects, partnerships and institutes.

Identified CCS project s in Australia, t heir cost and their st atus are outlined in Table 2.

Table 2 CCS projects in Australia

Name Proponent Cost (Sm} Funding (Sm} Scope Outcome La ~cale CCS projects Gorgon C02 Chevron $2,000 $60 (federal) Gas extraction Injection Project ccs ZeroGen Qld government $4,300 $103- 116 (Qld) Coal wit h CCS (planned} $39- 48 (fed} $41- 50 (Coal21} Wandoan IGCC Xstrata/Glencore ? $8- 50 (federal} Coal wit h CCS Plant $7 (Coal21) Hazelwood 2030 International $369 $30m, withdrawn Coal wit h CCS Power/Engie (Vic) $50, withdrawn (federal} IGCC Clean Coal HRL Ltd $750 $50 (Vic) Coal "suitable Demonstration $100 (federal} for" CCS

Surat Basin CTSCo (G lencore} ? $9 (federal) Ca rbon Ongoing $24 (Coal21} storage CarbonNet Vic government ? $30 (Vic) Ca rbon Ongoing $72 (federal) storage South West Hub WA government ? $55 (federal) Ca rbon Ongoing stora e Demonstration projects Callide-A CS Energy $245 $10m (Qld} Coal wit h Completed, ? (Japan) capture (no not ope rat ional $63- 65 (fed} storage) $83 (Coal21} Otway Research C02CRC $60 $5 (Vic) ccs Operational Facility $25 (federal) $10 (Coal21} Hazelwood Carbon Engie $10 ? ccs Completed, not Capture Pilot Plant operational

42 Commissioned a nd started-up, with C02 compressors expected to be operated in early 2017 when t hey are needed. Global CCS Inst itute (n.d.} Gorgon Carbon Dioxide Injection Project, https://www.globalccsinstitute.com/projects/gorgon-carbon-dioxide-injection-project

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Australia has only ever had one ‘operational’ carbon capture project at a black coal power plant: Callide-A, a small demonstration plant. While this plant successfully captured carbon, the volumes were small and required a very large subsidy, and the operator could not find a place to store it. A brown coal demonstration, the Hazelwood Carbon Capture and Mineral Sequestration Pilot Plant, also operated but was even smaller.

As shown in Table 2, there is one large-scale CCS project operational or ready to operate: the Gorgon CO2 Injection Project. This project will store CO2 separated from gas during the extraction and purification process.

There are three carbon storage projects underway:

 CarbonNet,  the South West Hub project, and  a nascent Surat Basin feasibility study.

These projects are looking for sites that could take and safely store millions of tonnes of CO2 per year. If the two most advanced projects are successful, they would allow for the storing of 1.8–11 tonnes of CO2 per annum. This represents 0.3–2% of Australia’s annual emissions. They are not expected to be operational until the 2020s.

Australia also has one non-commercial demonstration project, the Otway project, which is successfully capturing and storing a small volume of CO2.

There are a number of CCS projects that failed, despite government subsidies, including:

 ZeroGen is the most prominent and expensive, but others include  HRL Ltd’s coal gasification plant,  International Power’s Hazelwood 2030 project and  CTSCo’s Wandoan coal gasification plant,

There are no other Australian large-scale CCS projects at any stage of development, even the most remote “identify” stage, as classified by the Global CCS Institute.43

The following sections outline some of these projects, showing the great difficulties involved in getting CCS to work.

43 Global CCS Institute (n.d.) Large scale CCS projects

Money for nothing 18

ZEROGEN (ZERO RESULTS)

The ZeroGen project was a plan to build a $4.3 billion, 530 MW IGCC coal power plant in central Queensland, with the “longer term potential” for CCS to capture 2 million tonnes of CO2 per annum.44

The bulk of the project funding was spent trying to identify a storage location for captured CO2. ZeroGen spent four years and $90 million exploring and appraising the Denison Trough, finding it “unsuitable for large scale commercial storage”. Having failed in Denison, ZeroGen had its eye on two “undiscovered, un-risked resources” – the Galilee Basin and the Surat Basin. A $300 million pipeline would have been required to transport the CO2 to either basin.45

The project went into administration in October 2011, despite having received $183– 214 million from the federal government’s NLECI fund, the industry Coal21 fund and from the Queensland government (including $6 million transferred to the Australian Coal Association after the project’s collapse).46 The Queensland government had earmarked a further $200 million for the project.47

The Minerals Council of Australia website describes ZeroGen as a “completed” “feasibility study”.48 The Minerals Council is correct: ZeroGen’s failure shows that coal with CCS is not feasible in Australia, and suggests it will not be for some time, if ever.

CALLIDE-A

The Callide-A Oxy-firing Demonstration, built by CS Energy, has the distinction of being Australia’s only successful carbon capture from a black coal-fired generator.

44 Bonney (2010) ZeroGen Project: Low emissions coal fired power with carbon storage, p 3, https://www.engineersaustralia.org.au/sites/default/files/shado/Divisions/South%20Australia%20Divi sion/Resources/Groups/ZeroGen%20-%20EESA%2014th%20July%202010.pdf; ZeroCO2 (n.d.) ZeroGen, http://www.zeroco2.no/projects/zerogen; Minerals Council of Australia (n.d.) Coal21; MIT Carbon Capture and Sequestration Technologies (2016) ZeroGen fact sheet, https://sequestration.mit.edu/tools/projects/zerogen.html 45 Bonney (2010) ZeroGen Project: Low emissions coal fired power with carbon storage 46 Lion (2011) Anna Bligh’s team wastes another $116m on controversial ZeroGen clean-coal debacle, http://www.couriermail.com.au/news/queensland/clean-coal-plan-goes-to-zero/news- story/1e99a6d01bdecaa62bc34ac1273da6cd?nk=2e467983dd127e480f2d57a43e72fd20-1487559359; MIT Carbon Capture and Sequestration Technologies (2016) ZeroGen fact sheet; Minerals Council of Australia (n.d.) Coal21 47 MIT Carbon Capture and Sequestration Technologies (2016) ZeroGen fact sheet 48 Minerals Council of Australia (n.d.) Coal21

Money for nothing 19

The project, which cost $245 million, was never expected to be profitable. It received in-kind support from Japanese industry, and funding from the Queensland state government, the Japanese government, the Coal21 fund and two to four different federal government programs. These subsidies dwarf the project’s expected revenue of $18 million.49

The demonstration project operated for two years and nine months and achieved a “partial capture” of 75 tonnes of CO2 per day (27,300 tonnes per annum), but storage for the captured CO2 could not be found. Eight potential storage sites were examined but were unsuitable because of location, availability and geological profile.50

Chief executive of CS Energy, Martin Moore, said in 2017 on ABC 730:

We proved that technologically it’s possible to retrofit [CCS] to existing coal- fired plants, but commercially, the numbers don’t stack up … It’s unlikely there will be [a commercial operation for CCS in Australia], I think that technology may well be bypassed … simply because of the economics. … If you could decarbonise coal by capturing and sequestering the emissions, then you’d have clean coal. It sounds easy if you say it fast enough, but it’s not that simple.51

49 About $50 or $60 million of funding is attributed to the LETDF by MIT, but NLECI also says it distributed about that much to the project, and media reports the project received an unspecified amount of funding from CCS Flagships. It is not clear if one grant has been wrongly attributed to multiple funds, or if multiple funds contributed to the project. The Global CCS Institute also provided $2 million. Oxyfuel Technologies (2016) The Callide Oxyfuel Project, p 24, http://www.callideoxyfuel.com/Portals/0/Callide Oxyfuel Project Legacy Publication.pdf; CS Energy (2015) Callide Oxyfuel Legacy (video), https://www.youtube.com/watch?v=tlP4dIZ0BxQ; Asia-Pacific Partnership on Clean Development and Climate (n.d.) Callide-A Oxy-Fuel Demonstration Project, http://www.asiapacificpartnership.org/pdf/Projects/CFETF/CPD/CFE-06-05.pdf; Greig, Bongers, Stott and Byrom (2016) Overview of CCS roadmaps and projects, http://www.co2crc.com.au/wp- content/uploads/2017/02/WP3 CCS-Roadmaps-and-Projects.pdf; MIT Carbon Capture and Sequestration Technologies (2016) Callide-A Oxyfuel fact sheet, https://sequestration.mit.edu/tools/projects/callide a oxyfuel.html; CS Energy (n.d.) Callide Oxyfuel Project, http://www.csenergy.com.au/content-(91)-callideoxyfuelproject.htm; Department of Resources, Energy and Tourism (n.d.) National Low Emissions Coal Initiative (NLECI) [recovered from Internet Archive]; Rollo (2014) Budget not expected to impact carbon capture plant, http://www.abc.net.au/news/2014-05-16/budget-not-expected-to-impact-carbon-capture- plant/5456858 50 Greig, Bongers, Stott and Byrom (2016) Overview of CCS roadmaps and projects, p 16; MIT Carbon Capture and Sequestration Technologies (2016) Callide-A Oxyfuel fact sheet 51 Cooper (2017) No more coal-fired power stations will be built in Australia, Queensland provider CS Energy says, http://www.abc.net.au/news/2017-02-16/coal-power-generator-says-new-plants-not- viable/8277210

Money for nothing 20

CS Energy, the only company to demonstrate carbon capture on a black coal plant in Australia, does not have faith in the commercial viability of CCS.

SURAT BASIN INTEGRATED CCS PROJECT

Storage in the Surat Basin was originally considered in conjunction with Glencore’s Wandoan coal gasification plant. Although the Wandoan project has been cancelled, CTSCo continues to consider the suitability of the basin for carbon storage. To this effect, it has received $8 million in federal and $24 million in Coal21 funding for pre- feasibility and feasibility studies, and a University of Queensland appraisal of the Surat Basin received a further $6 million of federal funding.52

Although the feasibility study is still ongoing, CTSCo anticipates that the demonstration project will have first storage of CO2 by 2020–2021.53

CARBONNET PROJECT

The CarbonNet Project is investigating the viability of storing 1–5 million tonnes of CO2 per annum in the Gippsland region, from carbon captured from Latrobe Valley brown coal plants.54

The project received $102 million in federal and state funding.55 As a CCS Flagships project, the CarbonNet Project was expected to be operating in 2015.56 It has been in the “feasibility” stage since 2012 and now has an expected operation date of “2020’s”.57

52 Minerals Council of Australia (n.d.) Coal21; Department of Industry (n.d.) Carbon Capture and Storage Research Development and Demonstration Fund: Project descriptions 53 CTSCo (n.d.) When, http://ctsco.com.au/when/ 54 Victoria State Government (n.d.) The CarbonNet Project, http://earthresources.vic.gov.au/earthresources/victorias-earth-resources/carbon-storage/about-carbon-capture-and-storage/the- carbonnet-project 55 CO2CRC (n.d.) CCS projects in Australia; Global CCS Institute (n.d.) The CarbonNet Project: CCS flagship status, https://hub.globalccsinstitute.com/publications/carbonnet-project/carbonnet-project-ccs- flagship-status; Victoria State Government (2012) The Carbon Net Project (brochure), https://hub.globalccsinstitute.com/sites/default/files/publications/50856/carbonnet-corporate- brochure.pdf 56 Department of Resources, Energy and Tourism (n.d.) CCS Flagship program: Information for applicants to support project nominations 57 Global CCS Institute (n.d.) Large scale CCS projects; Victoria State Government (2012) The Carbon Net Project (brochure); Victoria State Government (n.d.) The CarbonNet Project – Current Stage,

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SOUTH WEST HUB PROJECT

The South West Hub Project in Perth aims to store 2 million tonnes of CO2 annually, captured from industry and power plants. When the project was announced in 2009, it was an integrated project with six major CO2 emitters in the region serving as joint venture partners. These partners pulled out in 2015.58

The project has received $55 million in federal funding.59 It is still in the preparation phase, which was expected to conclude in 2013.60 As a CCS Flagships project, the South West Hub was expected to be operating in 2015.61 It is now expected to be operational in 2025.62

In October 2016, the project found with confidence that the site (the Lesueur) could have 0.8 million tonnes of CO2 injected per annum. The researchers believe that the rate could be as high as 6 million tonnes per annum.63

The Collie–South West region of Western Australia is a major industry hub that generates 25 million tonnes of CO2 per annum,64 so even 6 million tonnes successfully captured and stored per annum would represent less than a quarter of the region’s

http://earthresources.vic.gov.au/earth-resources/victorias-earth-resources/carbon-storage/about- carbon-capture-and-storage/the-carbonnet-project/why-we-need-the-carbonnet-project 58 The partners were Alcoa Australia, Griffin Energy Developments, Perdaman Cehmicals and Fertilisers, Verve Electrical Generation Corporation and Premier Coal Limited: Government of Western Australia (2012) South West CO2 Geosequestration Hub, p 2, http://www.ceg.uwa.edu.au/ data/assets/pdf file/0008/2186846/South-West-Hub.pdf; Western Australia Department of Mines and Petroleum (2016) The South West Hug Project: Developing a project in unconventional geology (webinar), 31:45–33:30, http://www.globalccsinstitute.com/insights/authors/WebinarOrganiser/2016/06/09/south-west-hub- project-developing-project-unconventional-geology?author=MTc1OTM%3D 59 CO2CRC (n.d.) CCS projects in Australia; the project is not explicitly named in this DOI announcement, but it fits the description: Department of Industry (n.d.) Carbon Capture and Storage Research Development and Demonstration Fund: Project descriptions 60 Government of Western Australia (2012) South West CO2 Geosequestration Hub, p 2, http://www.ceg.uwa.edu.au/ data/assets/pdf file/0008/2186846/South-West-Hub.pdf 61 Department of Resources, Energy and Tourism (n.d.) CCS Flagship program: Information for applicants to support project nominations 62 Global CCS Institute (n.d.) South West Hub, https://www.globalccsinstitute.com/projects/south-west- hub 63 Western Australia Department of Mines and Petroleum (2016) The South West Hug Project: Developing a project in unconventional geology (webinar), 29:40 onwards, 51:40 onwards, slides 30, 37 64 Calder (2012) How the carbon price works, https://www.slideshare.net/globalccs/wayne-calder- department-of-resources-energy-and-tourism-ccs-and-carbon-price-policy-in-australia/11- The CollieSouth West Hub Major

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emissions. The next-best site for CCS in Western Australia is 400 kilometres north of Perth, but there are no CO2-generating industries in that area.65

HAZELWOOD CARBON CAPTURE AND MINERAL SEQUESTRATION PILOT PLANT

From 2009 until an unspecified date, the Hazelwood Carbon Capture Pilot Plant captured about 25 tonnes per day of carbon from the flue gas of one of boiler at the Hazelwood brown coal power plant. This represents 9,000 tonnes per annum, or about one third of Callide-A’s captured carbon. The captured CO2 was used for water treatment, turning it into inert calcium carbonate.66

The project received an unspecified amount of funding from the federal government’s Low Emission Technology Demonstration Fund and the Victorian government.67

Hazelwood power plant will close in March 2017.

OTWAY RESEARCH FACILITY

The Otway research facility (run by CO2CRC in south-western Victoria) is Australia’s only successful demonstration of the complete carbon capture and storage lifecycle, from production to geological storage. It cost $60 million, of which at least $40 million came from government and Coal21 funding, and successfully injected 80,000 tonnes of CO2.68

65 Western Australia Department of Mines and Petroleum (2016) The South West Hug Project: Developing a project in unconventional geology (webinar), 29:40 onwards, 51:40 onwards, slides 30, 37 66 Global CCS Institute (2011) A look at the Latrobe Valley’s carbon capture pilot plants, http://www.globalccsinstitute.com/insights/authors/petercoombes/2011/10/19/look-latrobe-valleys- carbon-capture-pilot-plants ; Global CCS Institute (n.d.) Hazelwood Carbon Capture and Mineral Sequestration Pilot Plant, https://www.globalccsinstitute.com/projects/hazelwood-carbon-capture- and-mineral-sequestration-pilot-plant 67 International Power (2009) Hazelwood carbon capture project under way [retrieved from Internet Archive], https://web.archive.org/web/20110217051851/http://www.ipplc.com.au/uploads/2010/02/Internatio nalPowermrCCSlaunch080709.pdf 68 Minerals Council of Australia (n.d.) Coal 21; CO2CRC (n.d.) CCS projects in Australia, http://old.co2crc.com.au/research/ausprojects.html; Victoria State Government (n.d.) The CO2CRC Otway Project, http://earthresources.vic.gov.au/earth-resources/victorias-earth-resources/carbon- storage/about-carbon-capture-and-storage/co2crc-otway-project

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Projects internationally

Across the world, completed and operational CCS projects are extremely rare. According to the Global CCS Institute, there are only 16 large-scale CCS facilities operating globally – and only two of these projects involve coal:

 Boundary Dam  Petra Nova

In January 2017, the Global CCS Institute also identified Kemper County as “coming on- stream in the next few weeks”. If it does so, that will make three coal plants with CCS in the world.69

The Financial Times reports that there are no other coal with CCS plants “on the horizon” in the US.70

The final report of the MIT Carbon Capture and Sequestration Technologies program identified 43 “cancelled and inactive” projects – 32 of which were coal projects.71 The MIT program itself shut down in September 2016.

It is also worth mentioning that all three coal with CCS plants offset or expect to offset some of their costs by selling captured CO2 for enhanced oil recovery.72 Oil recovered using sequestered CO2 will itself be burned, contributing to global warming.

69 Papaspiropoulos (2017) On clean coal, https://www.crikey.com.au/2017/01/11/comments- entitlements-rorts/; Global CCS Institute (n.d.) Large scale CCS projects 70 Crooks (2017) World’s biggest carbon capture project on schedule, https://www.ft.com/content/eee0d5d6-d700-11e6-944b-e7eb37a6aa8e 71 The figure of 32 includes ZeroGen, wrongly listed as having a gas feedstock, and Swan Hills, with in situ coal gasification, but not the two petcoke projects: MIT Carbon Capture and Sequestration Technologies (2016) Cancelled and inactive projects, https://sequestration.mit.edu/tools/projects/index cancelled.html 72 Burton (2014) Is the Boundary Dam CCS plant in Canada really a success story?, http://reneweconomy.com.au/is-the-boundary-dam-ccs-plant-in-canada-really-a-success-story- 32486/ ; Irfan (2016) World’s largest carbon-capture plant to open soon, https://www.scientificamerican.com/article/world-s-largest-carbon-capture-plant-to-open-soon/ ; Kemper (n.d.) Kemper FAQ, http://kemperproject.org/kemper-faq/

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BOUNDARY DAM

Boundary Dam in Canada is the first CCS project to operate commercially. It is an existing plant retrofitted for CCS. The project cost C$1.5 billion, which Toohey notes is:

about three times the capital cost of a standard coal plant. It also has higher operating costs.73

Owner Saskpower “feels they can cut capital costs 20–30% on the next unit”.74 That would still make the plant over twice as expensive as standard coal.

PETRA NOVA

Unlike Boundary Dam and Kemper County, Petra Nova appears to have been built on time and to its budget. Its commercial viability relies on US$190 million in government subsidies, and revenue from selling the captured CO2 for use in recovering an additional 60 million barrels of oil from a nearby oil field.75

KEMPER COUNTY

The Kemper County coal plant, was intended to be operational by 2014. Instead, in mid-2016, the New York Times wrote:

The Kemper coal plant is more than two years behind schedule and more than [US]$4 billion over its initial budget, [US]$2.4 billion, and it is still not operational.

The plant and its owner, Southern Company, are the focus of a Securities and Exchange Commission investigation, and ratepayers, alleging fraud, are suing the company. Members of Congress have described the project as more boondoggle than boon.76

Two years ago, when the plant had cost just US$5.2 billion, the Sierra Club has concluded that, per energy output, the Kemper County coal plant would be the most

73 Toohey (2014) Clean coal dream little more than dust 74 MIT Carbon Capture and Sequestration Technologies (2016) Boundary Dam fact sheet, https://sequestration.mit.edu/tools/projects/boundary dam.html 75 Irfan (2016) World’s largest carbon-capture plant to open soon, https://www.scientificamerican.com/article/world-s-largest-carbon-capture-plant-to-open-soon/ 76 Urbina (2016) Piles of dirty secrets behind a model ‘clean coal’ project, https://www.nytimes.com/2016/07/05/science/kemper-coal-mississippi.html

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expensive power plant ever built, about six times more expensive than a gas plant of equivalent power.77 It was due (after many other delays) to come online in January 2017, as its cost exceeded US$7 billion, but it did not do so.78

At the time of writing in March 2017, proponent Southern Company has released an economic viability study that found that burning coal at the Kemper County plant is not economically viable unless gas prices rise substantially.79

77 Drajem (2014) Coal’s best hope rising with costliest US power plant, https://www.bloomberg.com/news/articles/2014-04-14/coal-s-best-hope-rising-with-costliest-u-s- power-plant 78 Perez (2017) Costs top $7b, deadline extended as Kemper plant reaches milestone, http://www.sunherald.com/news/business/article129898054.html 79 Balch and Bingham LLP (2017) 2017 Kemper Economic Viability Analysis, http://psc.state.ms.us/InsiteConnect/InSiteView.aspx?model=INSITE CONNECT&queue=CTS ARCHIVE Q&docid=382134

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Commercialisation

Coal with CCS faces challenges that may make it difficult to commercialise even if CCS can be implemented in Australia at scale.

PRICE AND RELIABILITY

The government has identified price and reliability as two areas where coal outperforms renewables.80 While this may be true for coal without CCS, industry research shows that coal with CCS is as expensive or more expensive than renewables, and that solar thermal with storage and hydro-electric power are actually more flexible than coal with CCS, meaning they are better able to respond to the periods of peak demand that can cause price spikes and blackouts.

CO2CRC have presented their expected levelised cost of emissions for different power sources. By 2030, solar thermal will be at most about as expensive as the cheapest coal with CCS. Wind and solar PV also perform better:

Figure 2 2030 Levelised cost of electricity

Source: CO2CRC (2016) Australian power generation technology report, p v Note: Labels and braces added to make the figure easier to parse.

As well as outperforming CCS on cost, some renewables are also more reliable. A 2016 report from CO2CRC shows that two renewables – solar thermal with storage and

80 For example, in the wake of the South Australian blackouts: Borrello (2017) Josh Frydenberg flags changes to allow CEFC to invest in carbon capture and storage

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hydro-electric – are “more favourable” than coal with CCS in terms of flexibility in “increase[ing] or decreas[ing] output to meet changes in demand, to respond to changing output from other plants, and to respond to changing grid conditions”.81

Figure 3 Electricity technology comparisons

Source: CO2CRC (2016) Australian power generation technology, p 21

Note: Purple highlighting added to emphasise the flexibility ratings under consideration.

According to Australia’s premier CCS R&D organisation, coal with CCS is less capable of dealing with peaks in demand than solar thermal or hydro-electric power, and is more expensive than renewables. Given that, it is difficult to see what niche it would fill.

NEED FOR A CARBON PRICE

Advocates for CCS consistently identify a carbon price as necessary for CCS to be successful, and cited its absence as a reason that projects failed to be commercialised.

The first chief executive of the Global CCS Institute, Nick Otter, said it clearly:

[T]o get the CCS deployed, ultimately you're going to need a carbon price. In the end, the big driver will be a good, strong carbon price.82

81 CO2CRC (2016) Australian power generation technology report, p 22, http://www.co2crc.com.au/wp- content/uploads/2016/04/LCOE Report final web.pdf 82 Kirkland (2010) Can Australia afford carbon capture and storage for coal?, https://www.scientificamerican.com/article/can-australia-afford-carbon/

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This has been repeated by numerous CCS proponents:

 The CEO of International Power, proponent of Hazelwood 2030, said €30– 40/tonne was needed for CCS in Europe83  Queensland’s ZeroGen project was uncommercial on a figure of $57/tonne84  TransAlta’s Pioneer Project, subsidised by the Global CCS Institute, was uncommercial at US$30/tonne85  CO2CRC has said that a “carbon price alone will be too low”, and government will have to make up the gap86  At Callide-A, CO2CRC described the lack of GHG legislation as “a challenge”87

The need for a carbon price was also clear in Treasury modelling that concluded that commercial uptake of CCS would “depend on the level of the carbon price in place”.88

The same point has also been made by the IEA, which wrote in 2012 that “CCS is a high cost abatement option and will remain so in the short‐term”.89 In 2013 they added that “If CCS technology becomes fully proven at commercial scale”, widespread adoption will require “a stable economy-wide carbon price”, or other regulation.90

Note however that the IEA does not consider CCS to be close to proven at commercial scale. This is well understood in the CCS sector in Australia. Dick Wells of the National Low Emissions Coal Initiative said that a carbon price alone would not drive CCS investment until the 2030s.91

83 CO2CRC (2007) CO2 futures issue 5, p 4, http://old.co2crc.com.au/dls/co2futures/CO2FUTURES Issue 05.pdf 84 2010 dollars. Garnett, Greig and Oettinger (2014) ZeroGen IGCC with CCS: A case history, p 81, https://energy.uq.edu.au/files/1084/ZeroGen.pdf 85 TransAlta Corporation (2013) Project Pioneer, p 24, http://hub.globalccsinstitute.com/sites/default/files/publications/98046/project-pioneer-summary- report.pdf 86 Aldous (2011) Carbon capture and storage – a vital part of our climate change response 87 Greig, Bongers, Stott and Byrom (2016) Overview of CCS roadmaps and projects 88 Commonwealth of Australia (2011) Strong growth, low pollution, p 161 89 International Energy Agency (2012) A policy strategy for carbon capture and storage, p 8, https://www.iea.org/publications/freepublications/publication/policy strategy for ccs.pdf 90 International Energy Agency (2013) Technology roadmap: Carbon capture and storage, p 27, https://www.iea.org/publications/freepublications/publication/technologyroadmapcarboncaptureand storage.pdf 91 Wells (2012) Dick Wells says clean coal will remain unviable for two decades, http://www.abc.net.au/news/2012-02-15/dick-wells/3772184

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Conclusion

The Turnbull government is showing an enthusiasm for CCS not seen since the first Rudd government. Some have cynically suggested that “anything’s possible with a big enough subsidy”.

The troubled history of CCS in Australia suggests that the cynics could be wrong. CCS is so uncommercial that even the enormous subsidies of the last decade have mostly resulted in cancelled, failed and bankrupt projects.

Moreover, even if the technology could be demonstrated reliably at scale, the proponents of these projects consistently identify a high carbon price as being necessary for their commercial viability. Without such a price, any new projects will need an even greater subsidy from government. Meanwhile, the cost of renewables and storage continues to fall.

Prime Minister Turnbull put it well:

$590 million is a conservative figure. Spending more money on CCS because we have already lost so much would risk throwing good money after bad.

92 Turnbull (2017) Address at the National Press Club and Q&A, http://malcolmturnbull.com.au/media/address-at-the-national-press-club-and-qa-canberra

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Sunk costs Carbon capture and storage will miss every target set for it

The IEA, the IPCC, the G8, the Australian Government, the Australian Coal Association and the Council of the European Union have set targets for carbon capture and storage. None of these targets have been met, and none of these targets are on track to be met.

Discussion paper

Bill Browne November 2018

Sunk costs 1 ABOUT THE AUSTRALIA INSTITUTE

OUR PHILOSOPHY

OUR PURPOSE – ‘RESEARCH THAT MATTERS’

Level 1, Endeavour House, 1 Franklin St Canberra, ACT 2601 Tel: (02) 61300530 Email: [email protected] Website: www.tai.org.au ISSN: 1836-9014

Sunk costs 2

Summary

Industry, government and international organisations have given CCS credibility by making predictions about its success and setting targets that give it a clear place in emissions reductions plans.

The only institutional target that CCS has met concerns the number of CCS projects launched. All targets for number of projects actually built and operating or for millions of tonnes of CO2 actually stored each year (“Mtpa”) have either not been met, or are not on track to be met.

The floundering of CCS over the past decade means that we cannot rely on it to reduce emissions from electricity generation. That sector should be decarbonised through uptake of renewable energy, closure of fossil fuel power plants and increased energy efficiency.

Sunk costs 3 Table 1: Institutional targets and progress/outcome

Institution Target Progress/Outcome GS 20 new large-sca le CCS First target (20 launched by 2010) demonstration projects achieved. launched by 2010, Second target (20 operating by 2020) operating by 2020 not on track. 12 new project s operating, not all of which meet the criteria. 17 new project s maximum by 2020 Australian Coal Large-scale Failed. Association demonstration projects No large-sca le projects operating by operating in Australia by 2015, or since. 2015 One proj ect maximum by 2020. Carbon Capture Both funded projects Initial target failed. and Storage operating by 2015, lat er Revised target not on track. Flagships 2020. Neither project expect ed to be (Australia) operating by 2020. Council of the 12 power projects Failed. European Union operating in the EU by No power proj ects operating by 2015. 2015 None expected by 2020. International 100 large-sca le CCS Initial target not on track. Energy Agency {I) proj ects operating by Revised target not on track. 2020 (new and exist ing) 18 new and exist ing project s Revised t o 34 projects operating. 23 proj ect s maximum by 2020 International 255 Mtpa stored by CCS Initial target not on track. Energy Agency {II) proj ects by 2020 (new Revised target not on track. and existing) rv30 Mt pa capacity in 2017 Revised t o 50 Mtpa by 9.3 Mt pa proven ca pture rate in 2017 2020 tv38 Mt pa capacity by 2020 International 400 Mtpa stored by Not on track. Energy Agency (Ill) large-sca le CCS proj ects rv30 Mt pa capacity in 2017 by 2025 9.3 Mt pa proven ca pture rate in 2017 rv45 Mt pa capacity by 2025 IPCC 2,600-4,900 Mtpa by Not on track. 2020 38 Mt pa capacity projected in 2020. CFMEU, WWF, The 10,000 GWh from CCS Not on track. Climate Institute, power plants in 2020 No commercial-scale CCS power Australian Coal plants happening or planned Association Note: Mtpa stands for "million tonnes of C02 stored per annum".

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Introduction

International organisations and carbon capture and storage (CCS) boosters have made bold predictions about the uptake and success of CCS technologies. The G8, the International Energy Agency, Australian Coal Association and the Council of the European Union have all set targets for CCS uptake.

CCS’ progress towards these targets is used to justify taking money from renewables and energy efficiency projects in order to fund more CCS. Last year, the Minerals Council of Australia argued for the Clean Energy Finance Corporation to extend to funding CCS projects, partly on the grounds that the world has met the G8 target of 20 large-scale CCS projects by 20201 (although this is not the case; see below).

The targets that were set represent credible milestones for how CCS must advance if it is to play a key role in the fight against climate change. If it has failed to meet these targets, the technology is less developed than expected – and cannot be depended on.

1 Minerals Council of Australia (2018) Clean Energy Finance Corporation Amendment (Carbon Capture and Storage) Bill 2017, p 4, https://web.archive.org/web/20180416063911/http://www.minerals.org.au/file_upload/files/annual_ reports/180921_CEFC_Amendment_(CCS)_Bill_2017.pdf

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Target categories and criteria

Ambitions for carbon capture and storage projects fall into two main categories, each with its own sub-categories:

 Number of large-scale projects: These targets specify how many large-scale projects must exist to meet the target. o Launched: Count of projects “launched” or otherwise progressed (but not necessarily complete) o Completed: Count of projects operational  Capture and storage volume: These targets specify how many Mtpa of CO2 should be captured and stored to meet the target. o Potential capture: Total potential for capture (“capacity”) in a year o Actual capture: Total actually captured in a year o Proven capture: Total “proven” to be captured (meeting strict standards around reporting, reliability and safety) in a year

Some targets fall into both categories, for example the IEA 2009 Roadmap’s target of 100 large-scale projects capturing 255 Mtpa between them.

The particular criteria set for the target will determine whether projects, capacity and storage count towards the target. For example, the definition of “large-scale” differs across projects, as does what level of verification is required for storage to be “proven”.

There is also a temptation to blur the lines, for example counting storage capacity as “actually captured”, even if the project’s potential is not fully utilised, or to count “launched” projects towards the completed projects target. However, this is not appropriate. If the target is completed projects or CO2 actually captured, that is what progress must be measured against.

LARGE-SCALE PROJECTS

A number of targets reference the number of “large-scale” projects launched or operational (completed). The main criteria are:

 What counts as a large-scale project  Whether existing completed projects count towards the target

Sunk costs 6

Large-scale

The definition of large-scale has changed over the years, even within organisations.

The Global CCS Institute worked with the G8 to set the particular criteria required for its targets. They initially used a threshold of 1 Mtpa captured as the measure of “large- scale” or “commercial-scale”. By the time the G8 criteria were settled, the threshold for non-coal projects had been lowered to “in the order of” 0.5 Mtpa captured (coal projects remained at “in the order of” 1 Mtpa captured).2

The Global CCS Institute further revised its criteria to capturing “not less than 80 per cent” of 1 Mtpa for coal-fired power stations (i.e., 0.8 Mtpa captured and stored) and capturing “not less than 80 per cent” of 0.5 Mtpa for other projects (i.e., 0.4 Mpta captured and stored), which is the threshold adopted by the IEA.3

Existing completed projects

A key detail is whether a project that pre-dates the target counts towards it. In other words, is it a target for X new projects by a certain year, or just a target for X total projects by a certain year.

Where there were no existing projects, this is a moot point. For example, since the EU had no large-scale projects to begin with, its goal of 12 power projects by 2015 is necessarily for 12 new projects.

On the other hand, this is a vital question for the G8 target. There are six CCS projects that pre-date the G8 target being set, five of which would probably meet the G8’s definition of “large-scale”. If these projects are not counted, there is no conceivable way for the G8 target to be met.

2 Global CCS Institute (2009) Strategic analysis of the global status of carbon capture and storage, report 5: Synthesis report, p 9, https://hub.globalccsinstitute.com/sites/default/files/publications/5751/report-5-synthesis- report.pdf; Global CCS Institute (2010) The global status of CCS: 2010, p 71, http://hub.globalccsinstitute.com/sites/default/files/publications/12776/global-status-ccs-2010.pdf; IEA and CSLF (2010) Carbon capture and storage: Progress and next steps, p 9-10, http://hub.globalccsinstitute.com/sites/default/files/publications/5701/iea-cslf-report-muskoka-2010- g8-summit.pdf 3 IEA (2013) Technology Roadmap: Carbon capture and storage, 2013 edition, p 19, https://www.iea.org/publications/freepublications/publication/TechnologyRoadmapCarbonCapturean dStorage.pdf; see also Global CCS Institute (2010) The global status of CCS: 2010, p 48, http://hub.globalccsinstitute.com/sites/default/files/publications/12776/global-status-ccs-2010.pdf

Sunk costs 7

POTENTIAL AND ACTUAL CAPTURE

A number of targets involve the potential to capture and store or the actual capture and storage of a certain volume of CO2. The main criteria are:

 Whether potential, actual or proven capture is the measure  Whether the capture from any project counts towards the total, or just that done by large-scale projects

Potential, actual or proven capture/storage

A project might have the nominal ability to capture some amount of CO2, but whether it actually captures that amount is a key question. In addition, a project’s actual capture may be higher than its proven capture if it cannot satisfactorily demonstrate that its capture is secure for the long-term.

In fact, all existing targets specify that it is the actual or proven capture – and not the capture potential – that is the criteria. However, it is worth emphasising because capture potential is the data that is more readily available – and so it is tempting to use it as a proxy for actual or proven capture.

ENHANCED OIL RECOVERY (“EOR”)

Whether to count EOR projects and EOR capture towards CCS development is a contentious question, for a number of reasons as provided by the Global CCS Institute:4

 EOR projects may also require dedicated geological storage because EOR projects do not use a constant volume of CO2 over their lifetime  Not all regions and countries have opportunities for EOR  Not all oil fields are suitable for EOR  The timeframe for EOR is narrow  Public support for taxpayer funding of EOR is limited

The G8 target does include EOR projects, despite describing EOR as a “distraction to CCS development” and saying that “the majority of the CO2 EOR experience has yielded very little information on CO2 storage, monitoring and risk assessment”.5

4 Global CCS Institute (2011) Global storage resources gap analysis for policy makers, report: 2011/10,, http://hub.globalccsinstitute.com/sites/default/files/publications/23707/2011-10-global-storage- resources-gap-analysis-policy-makers.pdf

Sunk costs 8

Targets

This documents the institutional targets and projections that have been made for CCS.

IEA TARGETS

Roadmaps

2009 Roadmap:

 100 projects capturing 255 Mtpa by 2020  OECD Pacific has seven projects storing 17 Mtpa by 2020  Coal makes up 37% of CCS, storing 94 Mtpa, by 2020

2013 Roadmap:

 34 projects capturing 50 Mtpa by 2020

In the IEA’s 2009 roadmap, the IEA proposed a “BLUE Map” scenario in which CCS reduced carbon emissions by 9.5 Gt CO2 in 2050, or 19% of the total. This would require 100 projects by 2020, storing 255 Mtpa.6

In 2011, the IEA confirmed:

Some 100 projects globally are still required by 2020 if we are to set CCS technologies on the right pathway to delivery.7

However, in 2013 the Roadmap was re-published and the IEA cut its ambition from 100 CCS projects to “upwards of 30”, not including the four that were operational in 2013,8

5 Global CCS Institute (2009) Strategic analysis of the global status of carbon capture and storage, report 5: Synthesis report, p 25-26, https://hub.globalccsinstitute.com/sites/default/files/publications/5751/report-5-synthesis- report.pdf; Global CCS Institute (2011) Global storage resources gap analysis for policy makers, report: 2011/10, http://hub.globalccsinstitute.com/sites/default/files/publications/23707/2011-10-global- storage-resources-gap-analysis-policy-makers.pdf 6 IEA (2009) Technology roadmap: Carbon capture and storage, p 6, 14–22, https://www.iea.org/publications/freepublications/publication/CCSRoadmap2009.pdf 7 Lipponen, Burnard, Beck, Gale and Pegler (2011) The IEA CCS Technology Roadmap: One Year On, p 5755, https://www.sciencedirect.com/science/article/pii/S1876610211008502

Sunk costs 9

capturing around 50 Mt CO2 p.a.9 The explanation given was practical – too few projects were in the advanced stages of planning and the revised goal was “set in this context” – rather than based on what was required for fossil fuel technology to remain viable in a carbon-constrained world.10

The IEA’s 2009 Roadmap broke down the number of projects and emissions avoided needed by region and sector.11 See Figure 1.

Although we do not have the resources to track the performance of each of these regions and industries, we have analysed the coal industry and the OECD Pacific region (Australia, Japan, New Zealand and South Korea)12 as areas of particular interest.

The 2013 Roadmap did not update region- and industry-specific targets for CCS, for example for the OECD Pacific or for the coal industry.

Figure 1: 2009 Roadmap's breakdown of projects and Mtpa

8 IEA (2003) Technology Roadmap: Carbon capture and storage, 2013 edition, p 10, 23, 25, https://www.iea.org/publications/freepublications/publication/TechnologyRoadmapCarbonCapturean dStorage.pdf; note they must be using somewhat different criteria to the Global CCS Institute. 9 Lipponen, McCulloch, Keeling, Stanley, Gerghout and Berley (2016) The politics of large-scale CCS deployment, https://ac.els-cdn.com/S1876610217320933/1-s2.0-S1876610217320933- main.pdf?_tid=87f6e6fc-f8cd-466f-b2fc- eefdfe2c60bc&acdnat=1524462638_c2be0b12e1f13132574480cdf7541b28 10 IEA (2003) Technology Roadmap: Carbon capture and storage, 2013 edition, p 23, https://www.iea.org/publications/freepublications/publication/TechnologyRoadmapCarbonCapturean dStorage.pdf 11 The IEA 2009 Roadmap and the IEA 2009 Roadmap foldout give different figures for the CO2 emissions avoided (299 Mtpa vs 255 Mtpa), and by extension coal’s contribution. We have chosen the lower figures to be more conservative, and because the Roadmap foldout was updated more recently than the Roadmap. See IEA (2009) Carbon capture and storage roadmap, p 17, 20, https://www.iea.org/publications/freepublications/publication/CCSRoadmap2009.pdf; IEA (2010) Technology roadmap – carbon capture and storage 2009: foldout, https://webstore.iea.org/technology-roadmap-carbon-capture-and-storage-2009-foldout 12 IEA (2009) Carbon capture and storage roadmap, p 14, https://www.iea.org/publications/freepublications/publication/CCSRoadmap2009.pdf

Sunk costs 10

Source: IEA (2009) Carbon capture and storage roadmap, https://www.iea.org/publications/freepublications/publication/CCSRoadmap2009.pdf; IEA (2010) Technology roadmap – carbon capture and storage 2009: foldout, https://webstore.iea.org/technology-roadmap-carbon-capture-and-storage-2009-foldout

Criteria

The IEA provided criteria for projects to count as eligible towards the Roadmaps targets:

 Large-scale: The IEA defined the projects needed by 2020 as “large-scale”,13 later clarifying that they were using the new Global CCS Institute definition of 0.8 Mtpa captured and stored for coal-fired power stations and 0.4 Mtpa captured and stored for other projects.14  Storage: The Mtpa target is based on storage, not storage potential.  New and existing: The 2009 Roadmap target did not require new projects. The 2013 Roadmap target did require 30 new projects, but also identified that there were only four existing projects that met its criteria. This paper therefore sets the target at 34 new and existing projects.

2DS Target

 Over 400 Mtpa stored in 2025

The IEA’s 2DS scenario identifies changes required for the world to have a 50% chance of limiting global warming to 2 degrees Celsius.15

In 2017, the IEA reviewed 26 technologies to assess how they were tracking towards “2DS”. Large-scale CCS received the worse assessment of “red”, significantly off- track.16

13 “The roadmap’s recommendation [is] of 100 large-scale projects”: IEA (2009) Carbon capture and storage roadmap, https://www.iea.org/publications/freepublications/publication/CCSRoadmap2009.pdf; Saether (2010) European Zero Emissions Platform: ‘We are ready to go’, http://bellona.org/news/ccs/2010-10- european-zero-emissions-platform-we-are-ready-to-go 14 IEA (2013) Technology Roadmap: Carbon capture and storage, 2013 edition, p 19, https://www.iea.org/publications/freepublications/publication/TechnologyRoadmapCarbonCapturean dStorage.pdf; see also Global CCS Institute (2010) The global status of CCS: 2010, p 48, http://hub.globalccsinstitute.com/sites/default/files/publications/12776/global-status-ccs-2010.pdf 15 IEA (n.d.) Scenarios and projections, https://www.iea.org/publications/scenariosandprojections/ 16 IEA (2017) Tracking clean energy progress 2017, p 6, 11, https://www.iea.org/publications/freepublications/publication/TrackingCleanEnergyProgress2017.pdf

Sunk costs 11

G8 TARGETS

 20 new large-scale CCS projects launched by 2010  20 new large-scale CCS projects operating by 2020

In 2008, the G8 leaders announced:

We strongly support the launching of 20 large-scale CCS demonstration projects globally by 2010, taking into account various national circumstances, with a view to beginning broad deployment of CCS by 2020.17

The requirement for “broad deployment” was interpreted to mean that the 20 projects would be operational by 2020.18

Criteria

Involved parties set criteria for projects to count as eligible towards the target.19

 New projects: The projects must be “in addition to those already operating” when the target was set.20  Large-scale: 0.5 Mtpa captured (non-coal) or 1 Mtpa captured (coal). This was a revision down from the initial metric of 1 Mtpa for all projects.21

17 Global CCS Institute (2010) The global status of CCS: 2010, p 71, http://hub.globalccsinstitute.com/sites/default/files/publications/12776/global-status-ccs-2010.pdf; sometimes described as a G20 target, see for example: Page (2011) Global status of CCS: 2011, https://www.youtube.com/watch?v=DxhbLGDig_g 18 Global CCS Institute (2009) Strategic analysis of the global status of carbon capture and storage, report 5: Synthesis report, p 172, https://hub.globalccsinstitute.com/sites/default/files/publications/5751/report-5-synthesis-report.pdf 19 Global CCS Institute (2010) The global status of CCS: 2010, p 71, http://hub.globalccsinstitute.com/sites/default/files/publications/12776/global-status-ccs-2010.pdf; see also IEA and CSLF (2010) Carbon capture and storage: Progress and next steps, p 9-10, http://hub.globalccsinstitute.com/sites/default/files/publications/5701/iea-cslf-report-muskoka-2010- g8-summit.pdf 20 IEA (2016) 20 years of carbon capture and storage, p 10, 17, https://www.iea.org/publications/freepublications/publication/20YearsofCarbonCaptureandStorage_ WEB.pdf; see also SBC Energy Institute (n.d.) Leading the energy transition: Bringing carbon capture and storage to market, p 7; see also World Coal Association (2018) Fluctuating policy and political support for CCS, https://twitter.com/WorldCoal/status/1034498402216824832 21 Global CCS Institute (2009) Strategic analysis of the global status of carbon capture and storage, report 5: Synthesis report, p 9, https://hub.globalccsinstitute.com/sites/default/files/publications/5751/report-5-synthesis- report.pdf; Global CCS Institute (2010) The global status of CCS: 2010, p 71, http://hub.globalccsinstitute.com/sites/default/files/publications/12776/global-status-ccs-2010.pdf;

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 Storage: The scale requirement is based on capture, not capacity.  Integrated: The project integrates capture and storage, and transport (if applicable).  Proven capture: A monitoring, measurement and verification plan must be provided.

In the Global CCS Institute’s initial assessment in 2010, only one project met all seven criteria – the Gorgon Gas Project, which is still not operating. Four operating projects met six criteria (one of these, In Salah, has since closed) and five operating projects met five criteria.22

The Minerals Council of Australia said in 2017:

there will be over 20 large scale CCS projects operating by 2020 including Western Australia’s Gorgon Carbon Dioxide Injection Project. This meets the G8’s 2008 objective of 20 such projects by 2020.23

This is based on a misunderstanding the G8 target, because it is counting projects that already existed when the target for new projects was set.

CCS academics Lipponen, McCulloch, Keeling, Stanley, Berghout and Berley confirm in their 2017 paper that the G8 target will be missed because at best, there will be 14 new large-scale CCS projects operating by 2020.24 They must be using more conservative criteria than the Global CCS Institute – a count of the Global CCS Institute database of large-scale projects operating or under construction gives a slightly higher figure of 17.25

IEA and CSLF (2010) Carbon capture and storage: Progress and next steps, p 9-10, http://hub.globalccsinstitute.com/sites/default/files/publications/5701/iea-cslf-report-muskoka-2010- g8-summit.pdf 22 Global CCS Institute (2010) The status of CCS projects: Interim report 2010, p 16-17, http://hub.globalccsinstitute.com/sites/default/files/publications/5686/status-ccs-projects-interim- report-2010.pdf 23 Minerals Council of Australia (2018) Clean Energy Finance Corporation Amendment (Carbon Capture and Storage) Bill 2017, p 4, https://web.archive.org/web/20180416063911/http://www.minerals.org.au/file_upload/files/annual_ reports/180921_CEFC_Amendment_(CCS)_Bill_2017.pdf 24 Lipponen, McCulloch, Keeling, Stanley, Berghout and Berley (2017) The politics of large-scale CCS deployment, p 7583, https://ac.els-cdn.com/S1876610217320933/1-s2.0-S1876610217320933- main.pdf?_tid=d215c205-2d22-47ec-bf33- 6fea38654996&acdnat=1524528931_13e1c799ed0a985fb5ef6aeb2361e1f4 25 Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects

Sunk costs 13

In either case, these are best case scenarios. The true number of CCS projects that meet the G8 target by 2020 could be significantly lower, for several reasons.

 Under construction: The five projects “under construction” could be delayed or cancelled, as so many other CCS projects have been. The rate of failure over project lifetime is two-to-one.26  Closures: Some of the currently operating CCS projects could close, as the In Salah project did in 2011.27  EOR projects: Whether to include EOR projects in the count is controversial. At most five projects would meet the target by 2020 if EOR projects are excluded.  G8 criteria: A project can be operating without meeting all seven G8 criteria. In 2010 (the last time this analysis appears to have been conducted), only one of the projects met all seven criteria: the Gorgon Gas Project. Half of all operating projects met fewer than six of the criteria.28 One example is that the Global CCS Institute database lists two different CCS projects associated with the Alberta Carbon Trunk Line (Agrium CO2 Stream and Sturgeon Refinery CO2 Stream). However, G8 projects are meant to cover the whole process – so these two projects may be properly counted as just one.  Large-scale: The Global CCS Institute’s definition of “large-scale” has loosened since the G8 criteria were fixed, and now includes smaller projects. Two or three upcoming projects are below 0.5 Mtpa in capacity.29 Even if a project’s capacity exceeds the target, the G8 target is to store that much CO2. For example, Boundary Dam Power Station is listed as having a capacity of 1 Mtpa, which meets the G8 requirement for coal-fired power plants to store 1 Mtpa only if it operates at full capacity. In fact, over the 41

26 Lipponen, McCulloch, Keeling, Stanley, Gerghout and Berley (2016) The politics of large-scale CCS deployment, https://ac.els-cdn.com/S1876610217320933/1-s2.0-S1876610217320933- main.pdf?_tid=87f6e6fc-f8cd-466f-b2fc- eefdfe2c60bc&acdnat=1524462638_c2be0b12e1f13132574480cdf7541b28 27 MIT (n.d.) In Salah Fact Sheet, https://sequestration.mit.edu/tools/projects/in_salah.html 28 Global CCS Institute (2010) The status of CCS projects: Interim report 2010, p 16-17, http://hub.globalccsinstitute.com/sites/default/files/publications/5686/status-ccs-projects-interim- report-2010.pdf 29 Sinopec Qilu Petrochemical CCS and Yanchang Integrated Carbon Capture and Storage Demonstration are 0.4 Mtpa. The Alberta Carbon Trunk Line and Terrell Natural Gas Processing Plant have ranges given for their capacity, and part of the range falls below the 0.5 Mtpa target. See Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects

Sunk costs 14

months between October 2014 and March 2018, Boundary Dam stored 2 million tonnes of CO2.30 That represents less than 60% of capacity.

Unfortunately, the Global CCS Institute seems to have stopped doing detailed analysis against G8 criteria for each project. Some projects that were previously non-compliant may have become compliant (the reverse is also possible), but this analysis would have to be conducted anew for each project.

The world is not on track to meet the G8 target by 2020 because the target was for new projects, not counting the six existing ones. Of the 17 new built and under construction projects, several do not meet the G8’s criteria and would not count towards the target.

Australian Coal Association Target

 G8-style CCS projects in Australia operating by 2015

In 2009, Ralph Hillman of the Australian Coal Association (since merged with the Minerals Council of Australia) used the G8 targets to justify his claim that Australia will “have commercial scale demonstration plants with carbon capture and storage in operation in Australia by 2015”, adding:

Well, we have the whole G8 behind [the target]. There's a G8 commitment, there's a commitment from the Commonwealth Government, there's a commitment from state governments and there's commitment from industry.31

As an extension of the G8 target, this target has the same criteria as the G8 target.

IPCC EMISSIONS SCENARIOS

 2.6–4.9 Gt CO2 per annum (2,600–4,900 Mtpa) by 2020

In 2000, the IPCC Special Report on Emissions Scenarios considered six scenarios for the world’s carbon emissions, and identified the “projected potential of CO2 capture” as being between 2.6 and 4.9 Gtpa by 2020.32

30 SaskPower (2018) SaskPower Carbon Capture and Storage Surpasses Two Million Tonne Mark, http://www.saskpower.com/about-us/media-information/saskpower-carbon-capture-and-storage- surpasses-2-million-tonne-mark/ 31 Jones (2009) Ralph Hillman and Richard Denniss join Lateline, http://www.abc.net.au/lateline/ralph- hillman-and-richard-denniss-join-lateline/1689002

Sunk costs 15

COUNCIL OF THE EUROPEAN UNION TARGET

 12 power projects by 2015

The European Union aimed to:

stimulate the construction and operation by 2015 of up to 12 demonstration plants of sustainable fossil fuel technologies in commercial power generation [in the European Union].33

CARBON CAPTURE AND STORAGE FLAGSHIPS TARGET

 2–4 projects by 2015 (later 2020)

Prime Minister Kevin Rudd’s CCS Flagships program aimed to have two to four commercial-scale projects operating in Australia by 2015. Later the target was moved to 2020 and only two projects were selected for funding.34

PATHWAY TO ACCELERATED DEPLOYMENT OF CARBON CAPTURE AND STORAGE

 10,000 GWh of power generation from integrated CCS technologies in 2020  Commercial-scale (>300 MW) plants operating by 2020

A pathway to accelerated deployment of carbon capture and storage was a strategy to increase the uptake of CCS in Australia proposed in April 2008 by the Australian Coal Association (which would later merge with the Minerals Council); the Construction, Forestry, Mining and Energy Union – Mining and Energy Division; The Climate Institute

32 Referenced in IPCC (2005) Carbon dioxide capture and storage, p 24, https://www.ipcc.ch/pdf/special- reports/srccs/srccs_wholereport.pdf 33 Council of the European Union (2007) Presidencv conclusions, p 22, http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/93135.pdf; see also Kapetaki and Scowcroft (2017) Overview of Carbon Capture and Storage (CCS) Demonstration Project Business Models: Risks and Enablers on the Two Sides of the Atlantic, https://www.sciencedirect.com/science/article/pii/S1876610217320180#bib0010 34 Van Puyvelde (2016) What about Carbon Capture and Storage?, https://www.energynetworks.com.au/news/energy-insider/what-about-carbon-capture-and-storage

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(the assets and intellectual property of which were bestowed on The Australia Institute) and WWF Australia.35

35 The Climate Institute (2008) A pathway to accelerated deployment of carbon capture and storage, http://www.climateinstitute.org.au/verve/_resources/finalpolicydoc.pdf

Sunk costs 17 CCS progress

W hat follows is an analysis of CCS progress over t ime, and proj ected into the future. It shows that CCS is not on track t o meet any t arget .

LARGE-SCALE PROJECTS

New and existing CCS projects

IEA 2009 Roadmap:

• 100 projects by 2020

IEA 2013 Roadmap:

• 34 projects by 2020

There are 17 CCS projects current ly operat ing that might sat isfy at least t he most generous definition of " large-sca le" - that is to say, that t hey have the capacity to store at least 0.4 Mt pa. There are a further five in the pipeline t hat could be complete by 2020.

Th is is well short of t he IEA's init ia l t arget of 100 large-sca le projects by 2020. It is also short of t he IEA's revised t arget of 34 large-scale projects by 2020.

Figure 2: New and existing large-scale projects

100 90 80 70 - Total projects (completed) 60 ...."'u QI so ·o.. •••••• Total projects (including Q. 40 projected) 30 - IEA 2020 target (including 20 .. ····· revision) 10 0 ~ m o ~ N M ~ ~ ~ ~ ~ m o 0 0 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ N 0 0 0 0 0 0 0 0 0 0 0 0 0 ii.,Auslralia Institute N N N N N N N N N N N N N 5r.-.,...,fl,. -.,,ft'o".

Sunk costs 18 Source: Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects; Australia Institute calculations

New CCS projects only

GS 2008 Target:

• 20 new large-scale CCS projects operating by 2020

The IEA analysis counts the six projects completed between 1972 and 2009 that are still operational today. These projects pre-date the GS target, which was for new projects. In Figure 3, we show only those projects begun after the GS target was set.

The GS target also used a higher threshold for "large-scale", being "in the order of" 0.5 Mtpa (non-coal projects) or 1 Mtpa (coal projects), as opposed to 0.4 Mtpa and 0.8 Mtpa respectively. The " conservative" count (excl uding those projects that are or may be below 0.5/ 1 Mtpa) is shown in lighter blue in the figure below.

However, as the figure clearly shows, the GS target will not be met even w ith the incl usion of all of these potentially ineligible projects.

Figure 3: New large-scale projects {following GS target)

20 18 16 ...... - Total projects (completed) 14 •••••• Total projects (including "' 12 ....u projected) .!!!. 10 ..0 - Total projects (completed, Q. 8 conservative) 6 •••••• Total projects (including 4 projected, conservative) o2 ------~------~- - G8target n.:Australia Institute a.-. ... ., ti.• "T\oft'r.

Source: Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects; Australia Institute calculations

Su nk costs 19 POTENTIAL AND CAPTURE

Potential capture by 2020

The potential capture from CCS projects in 2020 is 38.6 Mtpa. This is so far short of the IEA 2020 target of 253 Mtpa or the IPCC 2020 projection of between 2,600 and 4,900 Mtpa potential capture that the figure is not even readable. See Figure 4 for the extreme disparity between projected capture potential in 2020 and the IEA target and IPCC projection.

Figure 4: New and existing capture capacity

5,000 4,500 4,000 - operating CCS potential capture 3,500 • • • • • • Operating CCS potential 3,000 111 capture (projection) ll. ~ 2,500 IEA 2020 target (including 2,000 revision) 1,500 - IPCC 2020 projection (lower 1,000 end) 500 - IPCC 2020 projection (upper end) 0 ~ ----.,....--,--...... -.--~-"T"'""----r- .;;,;;;""-, 0 .-4 N rr, '

Source: Global CCS Institute (2018) Large-scale CCS facilities, http://www.globa lccsi nstitute.corn/projects/la rge-sca le-ccs-p rojects; Austra Iia Institute calculations

Note: The 2020 IEA target is set at 253 Mtpa to reflect 2 Mtpa of small-scale CCS capacity.

Another way of depicting this is in Figure 5, below, showing in orange how much CCS capture potential is expected in 2020 versus the upper range of what the IPCC projected would be needed. There will l/127th as much as the upper range of the IPCC projections.

Sunk costs 20 Figure 5: Projected capture potential (orange) vs IPCC best-case projections (navy) ------TheAustralia Institute ------~'15mrthN~ Source: Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects; Australia Institute calculations

Proven capture by 2020

IEA 2009 Roadmap:

• Capturing 255 Mtpa by 2020

IEA 2013 Roadmap:

• Capturing 50 Mtpa by 2020

IPCC 2000 Scenarios:

• Capturing 2,600-4,900 Mtpa by 2020

The situation is worse for CCS than the above section suggests. That is because the targets are for C02 actually captured/stored, rather than the potential for capture/storage.

There can be a significant difference between how much C02 a proj ect has the potential to capture and how much it actually captures.

While we do not have good data on t he actual capture/storage rate, we do have good data on the proven rate. This is more selective than the actual capture rate, beca use it requires monitoring to prove that the C02 will not escape after storage.

Sunk costs 21 In 2017, the world's CCS potential was about 30 Mtpa, but its proven capture was just 9.3 Mt - meaning that CCS was overall operating at less than a third of capacity.36 Even if all projects currently under construction are completed by 2020, and they all start operating at full capacity, there will still only be 38 Mtpa captured.

Figure 6 shows the IEA 2020 target of 255 Mtpa captured compared to potential capture. It also shows what the proven capture rate would be if CCS continues to operate at less than a third of capacity (13 Mtpa).

The same problem applies to the IPCC CCS potential projections of 2,600-4,900 Mtpa, but those are so much larger than the projected capacity that including them in the figure would make the distinction impossible to make out.

Figure 6: New and existing capture capacity, including 2017 utilisation rate - out to 2020

300

250 - operating CCS potential capture 200 • • • • • • Operating CCS potential

111 capture (projection) .S- 150 ~ - Capture (completed, at 2017 utilisation rate) 100 • • • • • • Capture (projected, at 2017 so utilisation rate) ...... - IEA 2020 target (including revision)

Th,Auslr aliaInstitut e (r,o-.1111",h• ,......

Source: Global CCS Institute (2017) The global status of CCS 2018, p 18, 29, http://www.globalccsinstitute.com/sites/www.globalccsinstitute.com/files/uploads/global status/1-0 _ 4529_ CCS_ Global_Status_Book_layout-WAW _spreads.pdf; Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs projects

Note: The initial 2020 target is set at 253 Mtpa to reflect 2 Mtpa of currently operating small scale CCS capacity.

36 IEA (2017) Tracking clean energy progress 2017, p 11, htt ps ://www.iea.org/p u bii cations/freepu biicatio ns/p u bii cation/Track in gClea n Energy Progress2017. pdf

Sunk costs 22 Proven capture by 2025

IEA 2017 2DS Target:

• Over 400 Mtpa stored in 2025

The figure below compares the IEA 2DS 2025 target of 400 Mtpa captured compared to potential capture. It also shows what the proven capture rate would be if CCS continues to operate at less than a third of capacity.

Figure 7: New and existing capture capacity, including 2017 utilisation rate - out to 2025

450

400 - Operating CCS potential 350 capture 300 • • • • • • Operating CCS potential capture (projection) 111 250 ...ll. - capture (completed, at 2017 ~ 200 utilisation rate) 150 • • • • • • Capture (projected, at 2017 utilisation rate) 100 - IEA 2DS target (2025) soo ~-~-=====~=~~~=~,,,,,,, ...... 2010 2012 2014 2016 2018 2020 2022 2024

IEA (2017) Tracking clean energy progress 2017, p 11, https://www.iea.org/pu bi ications/freepubl ications/ pu bi ication/T rackingC Iea n EnergyProgress20 17.pdf; Global CCS Institute (2018) Large-scale CCS facilities, http://www.globa lccsinstitute .corn/projects/la rge-sca le-ccs-p rojects

Note: The IEA projects 45 Mtpa capacity in 2025. This figure assumes a steady increase between 2020 and 2025 to reach that volume. In practice, it would increase in steps as projects a re completed.

REGION- AND INDUSTRY-SPECIFIC PROGRESS

IEA 2009 Roadmap:

• OECD Pacific has seven projects storing 17 Mtpa by 2020 • Coal makes up 37% of CCS, storing 94 Mtpa, by 2020

Australian Coal Association 2009 Target:

Su nk costs 23

 G8-style CCS projects in Australia operating by 2015

Council of the European Union 2007 Target:

 12 power projects by 2015

Carbon Capture and Storage Flagships Target:

 2–4 projects by 2015 (later 2020)

Australia’s G8 projects

Australia did not build full-scale projects by 2015, as promised by the Australian Coal Association. The one full-scale project under construction, Gorgon Gas Project, is four years behind schedule and now expected in the first half of 2019.37

In 2010, the Global CCS Institute identified seven large-scale CCS projects that could meet the G8 criteria, including being operational by 2020 or earlier. It also indicated that Australia had committed to build three to five large-scale CCS projects by 2020.

Those projects were:38

1. Coolimba Power Project: A proposal to build a 400–450 MW coal-fired power plant in Western Australia, capturing 2 Mtpa. It was scheduled to be operational by 2015. 2. Wandoan Power IGCC CCS Project: A proposal to build a 400 MW IGCC39 power plant in Queensland, capturing 2.5 Mtpa. It was scheduled to be operational by 2015 but was cancelled in 2013.40 3. CarbonNet CCS Project: A proposal to build a range of CO2 capture facilities in Victoria, capturing 4–10 Mtpa. It was planned to be operational between 2015 and 2019. As of November 2018, it has been moved back to an operation date

37 Milne (2017) Carbon hiccup for Chevron with 5 million-tonne greenhouse gas problem at Gorgon LNG plant, https://thewest.com.au/business/oil-gas/carbon-hiccup-for-chevron-with-5-million-tonne- greenhouse-gas-problem-at-gorgon-lng-plant-ng-b88694565z 38 Global CCS Institute (2010) The status of CCS projects: Interim report 2010, p 6, Appendix A, http://hub.globalccsinstitute.com/sites/default/files/publications/5686/status-ccs-projects-interim- report-2010.pdf 39 “IGCC” refers to “integrated gasification combined cycle” technology, a form of power generation that turns coal into gas and burns the gas. 40 Queensland Government (2018) Projects discontinued or on hold, https://www.statedevelopment.qld.gov.au/assessments-and-approvals/discontinued-eis-projects.html

Sunk costs 24

of “2020s”, a reduced capture of 1–5 Mtpa and a capture type of “under evaluation”.41 4. The Collie South West Hub Project: A proposal to build a range of CO2 capture facilities in Western Australia, capturing 2.5–7.5 Mtpa. It was planned to be operational by 2015. As of November 2018, it has been moved back to an operation date of 2025 and a reduced capture of 2.5 Mtpa.42 5. ZeroGen Commercial Scale Project: A proposal to build a 400 MW IGCC plant in Queensland, capturing 2 Mtpa. It was planned to be operational by 2015, but it was cancelled in 2011.43 6. Browse LNG Development: A proposal to build an LNG plant in Western Australia, capturing 3 Mtpa. It was planned to be operational by 2017 but the project no longer appears as a current project in the Global CCS Institute database.44 7. Gorgon Carbon Dioxide Injection Project: A proposal to build an LNG processing plant in Western Australia, capturing 3.4 Mtpa. It was planned to be operational in 2014, but the CCS component is now only expected to be operational in 2019. Since the project began in 2016, it is estimated to have released 5.5 to 8 million tonnes of CO2 that would have been sequestered if the CCS technology were functioning.

CarbonNet and the South West Hub Project are the two CCS Flagships projects, discussed below in reference to the CCS Flagships’ target.

Australia’s CCS Flagships projects

Neither of the CCS Flagships programs were complete by the initial target date of 2015.

It is also unlikely that either CCS project will be complete by the revised target date of 2020.

In 2016, Energy Networks Australia wrote that:

41 Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects 42 Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects 43 Queensland Government (2018) ZeroGen Project, https://www.statedevelopment.qld.gov.au/assessments-and-approvals/zerogen-project.html 44 Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects

Sunk costs 25

It is unclear whether [the two CCS projects] can achieve this timeframe, as progress on both projects has been slow.45

Since then, there has been no indication that the projects are now on track.46

Australia’s pathway to accelerated deployment of CCS

Australia has no commercial-scale CCS at its power plants, and no plans to build any. As such, it will not meet the 10,000 GWh in 2020 target.

Coal

Figure 8 shows coal’s performance against the initial IEA target of 94 Mtpa captured by 2020. It shows 2.4 Mtpa captured in 2020, or 3% of the target. This reflects the Boundary Dam Power Station project coming online in 2014 and the Petra Nova project operating from 2017. This estimate is optimistic because Boundary Dam is operating significantly below capacity.

There are no other projects in the pipeline that could be complete by 2020.

45 Van Puyvelde (2016) What about Carbon Capture and Storage?, http://www.energynetworks.com.au/news/energy-insider/what-about-carbon-capture-and- storage#_ftn1 46 See for example: WA Department of Industry, Innovation and Science (2015) Carbon Capture and Storage Flagship South West Hub Project: Review report, https://industry.gov.au/resource/LowEmissionsFossilFuelTech/Documents/CCS-western-australian- south-west-hub-project-review-report.pdf; Victoria Earth Resources (n.d.) The CarbonNet Project, http://earthresources.vic.gov.au/earth-resources/victorias-earth-resources/carbon-storage/the- carbonnet-project

Sunk costs 26

Figure 8: Coal-with-CCS, operating and target

100 90 80 70 60 50 Operating CCS capacity 40 IEA 2020 target Mtpacaptured 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Global CCS Institute (2018) Large-scale CCS facilities, http://www.globalccsinstitute.com/projects/large-scale-ccs-projects

OECD Pacific

Figure 9 shows the OECD Pacific’s performance against the initial IEA target of 17 Mtpa captured by 2020. If the Gorgon Gas Project comes online in 2019, as is now planned (it has been delayed multiple times), then the OECD Pacific will have one project capturing 4 Mtpa, or less than a quarter of its target.

There are no other projects in the pipeline expected to be complete by 2020.

Sunk costs 27 Figure 9: CCS in the OECD Pacific, operating, planned and target

16 14

-o 12 QI - Operating CCS capacity EQ. 10 ~ --- Operating CCS 111 8 ...Q. capacity (planned) ~ 6 - IEA 2020 target 4 ,-- I 2 I I 0 0 ~ N ('l'l '

Source: Global CCS Institute (2018) Large-scale CCS facilities, htt p://www.globa lccsi nstitute .corn/projects/la rge-sca le-ccs-p rojects

EU power projects

The European Union built none of it s power project s by its target dat e of 2015, and has not built any since, despite spending " at least" EUR 587 million on at least 63 CCS projects.47

As of 2017:

The two projects currently operating storage in the European Economic Area, Sleipner and Sn~hvit, are located in Norway.48

Norway is not in t he European Unio n.

There are not even any plans for such plants:

European utilities Uniper and Engie in June [2017] announced they were walking away from a Dutch CCS project known as ROAD ... ROAD is the last proposal standing for a large-scale coal or gas power CCS project in Europe. Its

47 Tetter (2017) After spending €587 million, EU has zero C02 storage plants, https://euobserver.com/investigations/139257 48 Kapetaki and Scowcroft (2017) Overview of Carbon Capture and Storage {CCS) Demonstration Project Business Models: Risks and Enablers on the Two Sides of the Atlantic, https ://www. scie nced ir ect. co m/s ci ence/article/p ii/S1 8 76610217320180#bib00 10

Sunk costs 28

demise followed cancellation of CCS funding in Britain, ending prospects for a European commercial-scale demonstration power plant.49

There is still some room for industrial CCS, with a few such projects under consideration.50

49 Wynn (2017) The carbon-capture dream is dying, http://energypost.eu/the-carbon-capture-dream-is- dying/ 50 Wynn (2017) The carbon-capture dream is dying, http://energypost.eu/the-carbon-capture-dream-is- dying/

Sunk costs 29

Conclusion

The IPCC said in 2000 that by 2020 CCS would have the potential to capture between 2,600 and 4,900 Mtpa of CO2.

CCS will not have the potential to capture 2,600 Mtpa of CO2 by 2020.

The G8 said in 2008 that the world will need to build 20 new large-scale CCS projects by 2020 to enable the broad deployment of CCS.

The world will not build 20 new CCS projects by 2020.

The IEA said in 2009 that the world will need to build 100 large-scale CCS projects capturing 255 Mtpa by 2020 to make CCS a viable technology.

The world will not build 100 large-scale projects by 2020; it will not capture 255 Mtpa.

In 2013, the IEA revised its target to 34 large-scale projects capturing 50 Mtpa by 2020.

The world will not build 34 large-scale projects by 2020; it will not capture 50 Mtpa.

The IEA said in 2017 that CCS would have to capture 400 Mtpa by 2025 to be doing its bit to keeping global warming below 2 degrees Celsius.

CCS will not capture 400 Mtpa by 2025.

The Australian Coal Association said we would have large-scale projects by 2015.

Australia did not complete any large-scale projects by 2015.

Australia’s CCS storage projects were meant to be completed by 2015, then 2020.

Our storage projects were not completed by 2015; they will not be completed by 2020.

The EU was going to demonstrate CCS viability by building 12 power projects by 2015.

The EU did not build any power projects.

Carbon capture and storage has missed every target that involved getting projects up and running, and it is on track to miss every future target. The sector has never delivered.

Sunk costs 30 Appendix

PROJECTS OPERATING BEFORE GS TARGET SET

Number counting towards GS t arget: 0 (not new proj ect s)

Number counting towards IEA target: 6

Table 2: Table of projects

Name Operating Capacity Type Notes by (Mtpa) Terrell Natural Gas 1972 0.4-0.5 EOR Possibly below GS Processing Plant t arget of 0.5 Mtpa Enid Fertilizer 1982 0.7 EOR Shute Creek Gas 1986 7 EOR Processing Plant Sleipner C02 Storage 1996 1 Pu re Great Plains Synfuels Plant 2000 3 EOR and Weyburn-Midale Sn~hvit C02 Storage 200851 0.7 Pu re Source: Global CCS Institute (2018) Large-scale CCS facilities, http://www.globa lccsinstitute .corn/projects/la rge-sca le-ccs-p rojects

51 Operating by March 2008, before the G8 target was set in July 2008: IEA and CSLF (2010) Carbon capture and storage: Progress and next steps, p 5, http ://hub .globa lccsinst itute .corn/s ites/defa u lt/fi Ies/ pu biicat ions/5 701/ iea-cslf-report-rn uskoka -2010- g8-su rn rn it. pdf; Leblond (2008) Gaz de France receives first LNG from Snohvit, https ://www. ogj .corn/a rticles/2008/03/ gaz -de-france-receives-fi rst-1ng -frorn-snohvit. htrn I; Van Noorden (2009) Australia launches carbon capture institute, https://www.nature.corn/news/2009/090417/fu ll/news.2009 .372.htrnl

Sunk costs 31 NEW PROJECTS OPERATIONAL SINCE GS TARGET SET

Number counting towards GS target: 11 (Boundary Dam storing below target)

Number counting towards IEA target: 12 (more generous definition of "large-scale" than GS)

Table 3: Table of projects

Name Operating Capacity Type Notes by (Mtpa) Century Plant 2010 8.4 EOR Air Products Steam 2013 1 EOR Methane Reformer Coffeyville Gasification 2013 1 EOR Plant Lost Cabin Gas Plant 2013 0.9 EOR Petrobras Santos Basin 2013 1 EOR Pre-Salt Oil Field CCS Boundary Dam Power 2014 1 EOR Actual storage below GS Station target of 1 Mtpa; coal project Quest 2015 1 Pure Uthmaniyah C02-EOR 2015 0.8 EOR Demonstration Abu Dhabi CCS 2016 0.8 EOR Illinois Industrial 2017 1 Pure Carbon Capture and Storage Petra Nova Carbon 2017 1.4 EOR Coa l project Capture CNPC Jilin Oil Field 2018 0.6 EOR C02EOR Source: Global CCS Inst itute (2018) Large-scale CCS facilities, http://www.globa lccsi nstitute.corn/ projects/la rge-sca le-ccs-p rojects

Sunk costs 32 PROJECTS UNDER CONSTRUCTION

Number counting towards GS target: 2-3 (if built; note that Alberta Carbon Trunk Line - Agrium actual storage may be below G8 target too, and/or may more properly count as a single project with the Alberta Carbon Trunk Li ne - Sturgeon Refinery for G8 purposes)

Number counting towards IEA target: 5 (if built; more generous definition of "large scale" than GS)

Beyond 2020: There are no further projects under construction with operation dates after 2020. There are some identified as being in a more preliminary state.

Table 4: Table of projects

Name Oper Capacity Type Notes ating (Mtpa) by Gorgon Gas 2019 3.4-4.0 Pure Australian project Project Alberta Carbon 2019 0.3-0.6 EOR Actual storage may be below G8 target Trunk Line- of 0.5 Mtpa; both Alberta projects may Agrium count as one for G8 target Alberta Carbon 2019 1.2-1.4 EOR Both Alberta projects may count as one Trunk Line- for G8 target Sturgeon Refinery Sinopec Qilu 2019 0.4 EOR Below G8 target of 0.5 Mtpa Petrochemical CCS Yanchang 2020 0.4 EOR Below G8 target of 0.5 Mtpa Integrated CCS Demonstration Source: Global CCS Institute (2018) Large-scale CCS facilities, http://www.globa lccsinstitute .corn/projects/la rge-sca le-ccs-p rojects

Note: "Operating by" is the Global CCS lnstitute's prediction. For example, the Gorgon Gas Project is now only expected by 2019.

Su nk costs 33